What Is a Housing Start and Why Does It Matter?
Understand housing starts: a vital economic indicator revealing construction activity, market trends, and broader economic health.
Housing starts represent a fundamental economic measure reflecting the initiation of new residential construction projects. This metric provides insight into the health of the housing sector and the broader economy. It helps gauge market activity, consumer confidence, and future economic trends, and is closely monitored by analysts and policymakers.
What Qualifies as a Housing Start
A housing start is defined as the beginning of construction on a new residential housing unit, typically when excavation for the footing or foundation commences. For multi-unit buildings, all individual units are counted as started once the building’s foundation work begins, meaning a 25-unit apartment building registers as 25 housing starts.
This definition distinguishes a “start” from other stages of residential development, such as the issuance of a building permit or the completion of a project. A building permit signifies approval for construction but does not mean work has begun. Housing starts include various types of privately owned residential structures, such as single-family homes, townhouses, and multi-family units like apartments or condominiums. Excluded from these figures are institutional structures, group quarters like dormitories or nursing homes, and manufactured homes that are not built on a permanent foundation.
How Housing Starts are Tracked
Housing starts data in the United States are primarily compiled and released monthly by the U.S. Census Bureau and the Department of Housing and Urban Development (HUD). These agencies collaborate to produce the “New Residential Construction” report, collecting data through a survey where Census Bureau representatives contact permit holders to ascertain if construction has begun.
The Survey of Construction (SOC) tracks individual permits through project completion. This monthly survey is conducted primarily through phone calls, with site visits occurring when direct contact is not possible. While building permits are also reported, housing starts are specifically derived from tracking when actual groundbreaking occurs. The data is often presented as a seasonally adjusted annual rate to account for predictable fluctuations, allowing for more meaningful month-to-month comparisons.
Why Housing Starts Matter for the Economy
Housing starts serve as a forward-looking economic indicator. The initiation of new home construction reflects builders’ confidence in future demand and consumer willingness to invest in housing. A rise in housing starts suggests positive economic sentiment and can signal impending growth.
The housing sector significantly contributes to the overall economy. New construction generates demand for various industries, including building materials, appliances, and furnishings. It also creates jobs in construction, real estate, and financial services, impacting employment levels across these sectors. Fluctuations in housing starts can influence interest rates, consumer spending, and the broader financial markets. A sustained decline in housing starts may indicate a weakening economy, while consistent increases can point to expansion.