Forex Walkthrough

AAA

Economics - Home Sales


Release Date:
On or around the 17th of each month
Release Time:
8:30am Eastern Standard Time
Coverage:
Previous month\'s data
Released By:
U.S. Census Bureau
Latest Release:
http://www.census.gov/const/www/newresconstindex.html


Background
The New Residential Construction Report, more commonly known as "housing starts" on Wall Street, is a monthly report issued by the U.S. Census Bureau jointly with the U.S. Department of Housing and Urban Development (HUD). The data is derived from surveys of homebuilders nationwide, and three metrics are provided: housing starts, building permits and housing completions. A housing start is defined as beginning the foundation of the home itself, while building permits are counted as of when they are granted.
Both building permits and housing starts will be shown as a percentage change from the prior month and year-over-year period. In addition, both data sets are divided geographically into four regions: Northeast, Midwest, South and West. This helps to reflect the vast differences in real estate markets in different areas of the country. On the national aggregates, the data will be segmented between single-family and multiple-unit housing, and all information is presented with and without seasonal adjustment.
Housing starts and building permits are both considered leading indicators, and building permit figures are used to calculate the Conference Board's U.S. Leading Index. Construction growth usually picks up at the beginning of the business cycle (the Leading Indicator Index is used to identify business cycle patterns in the economy, and is used by the Federal Open Market Committee (FOMC) during policy meetings).
What It Means for You
The housing market may show the first signs of stalling following a rate hike by the Federal Reserve. This is because rising mortgage rates may be enough to convince homebuilders to slow down on new home starts. For traders looking to evaluate the real estate market, housing starts should be looked at in conjunction with existing home sales, the rental element of the Consumer Price Index and the Housing Price Index (also available from the Census Bureau). (For related reading, see Investing In Real Estate.)
According to the Census Bureau, "it may take four months to establish an underlying trend for building permit authorizations, five months for total starts and six months for total completions", so smart traders will look more closely at the forming patterns to see through often-volatile month to month results.
Strengths
-Very forward-looking, especially building permits; a good gauge for future real estate supply levels
-Often used to identify business cycle pivot points
-Sample size covers approximately 95% of all residential construction in the U.S.

Weaknesses
-No differentiation between size and quality of homes being initiated, only the nominal amount
-Only focuses on one component of the economy

Durable Goods


Related Articles
  1. Retirement

    Economic Indicators: Housing Starts

    By Ryan Barnes Release Date: On or around the 17th of the month Release Time: 8:30am Eastern Standard Time Coverage: ...
  2. Home & Auto

    8 Signs Your Neighborhood Is On The Upswing

    If you were hard-hit by the real estate crash, you may be wondering when things will get better for you. We show you how to keep tabs.
  3. Investing

    Where Are Real Estate Stocks Heading?

    We summarize five economic reports that investors should monitor monthly to keep them informed of where real estate and its related stocks are heading.
  4. Active Trading

    Leading Economic Indicators Predict Market Trends

    Leading indicators help investors to predict and react to where the market is headed.
  5. Home & Auto

    8 Signs Of A Real Estate Rebound

    Wondering when prices will start to turn around in your area? We'll show you how to get in the know.
  6. Personal Finance

    The Canadian Economy, At A Glance

    The 12 economic indicators described here together provide a comprehensive picture of the state of the Canadian economy.
  7. Economics

    Where International Real Estate Is Booming

    Which country has the hottest property market right now? The answer will undoubtedly surprise you.
  8. Home & Auto

    5 Ways an Open House Can Actually Hurt Your Home Sale

    Open houses have long been a way to get exposure for a home that's up for sale. But it turns out it may be more trouble than it is worth.
  9. Investing Basics

    Understanding The Case-Shiller Housing Index

    This index is a widely-used and respected barometer of the U.S. housing market and the broader economy.
  10. Stock Analysis

    The Smart Money Is In Apartment Construction

    Residential housing starts jumped 8.2%, but the gains came from apartment construction not single-family homes. Learn the key players.
RELATED TERMS
  1. New Home Sales

    An economic indicator that measures sales of newly built homes. ...
  2. U.S. Department of Housing and ...

    A U.S. government agency created in 1965 to support community ...
  3. NAHB/Wells Fargo Housing Market ...

    An index based on a monthly survey of members belonging to the ...
  4. Repeat-Sales Method

    A way of calculating changes in the sales price of the same piece ...
  5. Building Activity Indicators

    Economic reports that tell investors about the current and projected ...
  6. Accessory Dwelling Unit (ADU)

    A legal and regulatory term for a secondary house or apartment ...
RELATED FAQS
  1. What's the difference between housing starts and building permits?

    Both housing starts and building permits are economic indicators used to assess the health of the housing market, but their ... Read Answer >>
  2. How have low interest rates affected the real estate sector?

    Learn how low interest rates stimulate the real estate sector by making it more affordable to borrow money to invest in real ... Read Answer >>
  3. Is it possible to short sell real estate?

    The traditional idea of a short sale is selling something you don't have so that you can buy it back at a lower price. The ... Read Answer >>
  4. Is the Bureau of Labor Statistics accurate?

    Read this brief analysis of the accuracy of Bureau of Labor Statistics, including a summary of the types of reports issued ... Read Answer >>
  5. How does the law of supply and demand affect the housing market?

    Learn about the law of supply and demand, the relationship between supply and demand and how the law of supply and demand ... Read Answer >>
  6. How can my husband inherit a house deed?

    My mother in law wants to know the best way to leave the deed to her house to her son (my husband). Should it be left in ... Read Answer >>
Hot Definitions
  1. Over-The-Counter - OTC

    Over-The-Counter (or OTC) is a security traded in some context other than on a formal exchange such as the NYSE, TSX, AMEX, ...
  2. Quarter - Q1, Q2, Q3, Q4

    A three-month period on a financial calendar that acts as a basis for the reporting of earnings and the paying of dividends.
  3. Weighted Average Cost Of Capital - WACC

    Weighted average cost of capital (WACC) is a calculation of a firm's cost of capital in which each category of capital is ...
  4. Basis Point (BPS)

    A unit that is equal to 1/100th of 1%, and is used to denote the change in a financial instrument. The basis point is commonly ...
  5. Sharing Economy

    An economic model in which individuals are able to borrow or rent assets owned by someone else.
  6. Unlevered Beta

    A type of metric that compares the risk of an unlevered company to the risk of the market. The unlevered beta is the beta ...
Trading Center