Housing Starts/Building Permits

Importance: ***

Definition: The housing industry accounts for about 27% of investment spending and 5% of the overall economy. Housing starts is important because it is a leading indicator. Sustained declines in housing starts slow the economy and can push it into a recession. Likewise, increases in housing activity triggers economic growth.

Housing Starts Chart
 
Related Indicators:

Source: Bureau of the Census of the U.S. Department of Commerce

 Frequency: Monthly

Availability: Two to three weeks following the reported month

Direction:

Timing:

Volatility: Moderate

Likely Impact on Financial Markets:
                                                    
                    Interest Rates: Larger-than expected monthly increase or increasing trend is
                    considered inflationary, causing bond prices to drop and yields and interest rates
                    to rise.

                    Stock Prices: .

                    Exchange Rates: ....

Ability to affect markets:

Analysis of the Indicator:

Housing data tracks the four major regions of the U. S.: Northeast, Midwest, South, and West.

Building permit data is released at the same time as housing starts. Permit activity provides insight
into housing and overall economic activity in upcoming months. It is so important that it is included in
the index of leading economic indicators.

Housing activity is directly impacted by mortgage rates. Higher interest rates increase housing costs
and reduce the number of qualified borrowers, thus, a decline in home sales and drop-off in starts.
Conversely, lower interest rates increases housing affordability and spurs homes sales and housing
starts.

Housing data can have a significant impact on the bond market. A stronger-than-expected report is
viewed negatively, suggesting strong growth and possible inflationary side-effects. A weak report has
the opposite effect on the market.

WEB Links

A Graph of the latest Housing Starts data from The Economic Statistics Briefing Room of the White House.

The latest Housing Starts report from BLS.