Housing starts

- People talk about building their dream home. But a dream home is just a dream until the work crew shows up and starts digging the foundation, pouring the concrete, and putting up the house frame. Once that's happened, it's a dream housing start. Everyone wants to know what's going to happen to home sales. From politicians and government economists, 'cause it's important for economic growth, and investors in GE and Whirlpool, because it's important for appliance sales, to commodity traders, because you need lumber and copper to build a house. So, how can we forecast the number of new homes that will be sold? What data would be helpful? It's probably the number of new houses that have already started construction. After all, you can't sell a house you haven't started building. Housing starts represents the number of homes that have seen construction start in a certain month. So, each housing start in September, for example, represents a new home that's started to be built in September. And what we mean by starting house is when the construction on a new home actually begins and breaks ground. And that's the most important leading economic indicator of homes sold. So, if you decide to build your own dream house, the day the construction crew shows up and starts building is the day your house will be counted as started. Housing starts are based on surveys of home builders and they're part of a monthly report produced by the US Census Bureau and the US Department of Housing and Urban Development. So, what kind of data can you expect to see every month in the housing start report? Well, starts data includes seasonally adjusted annual rates, otherwise known as the SAAR, for the number of homes that are being sold. So, for example, if housing starts show at 1,200K, and this is how it's normally quoted, that means that 1.2 million new housing starts would happen in the entire year if that month is representative of activity in the whole year. After all, it's a seasonally adjusted annual rate, but based on that month's activity. So, that 1,200K, or 1.2 million, that's the number that you're gonna see on CNBC, quoted in the Wall Street Journal, or discussed on Bloomberg Radio. There are also non-seasonally adjusted rates and historical actual data that are also included in the report. And the housing starts data includes different kinds of housing data. After all, not all homes are for one family or what finance people call single family homes. A dream house probably only has one unit, but a dream duplex would have two units and a dream condo complex might have four, five, or more units. And we'd still need to count those starts and these data are broken down in the monthly reports. But each kind of structure, whether it's single family or multi-family, counts as just one start. And these so-called multi-unit starts, like condos or duplexes, are even more important for appliance makers like Maytag and Kenmore because each unit is likely to require a refrigerator, washer, dryer, and other appliances. There's an important regional breakdown that's also included in the report, and that can offer hints about coming regional construction job needs, regional appliance sales, home sales, and real estate opportunities. Big companies in one of these areas or in one of these fields can expect their share prices to move on the housing starts data. Home Depot might decide where to put its next stores based on where construction is taking place. So might Target or Wal-Mart. Plus, stock brokers may decide to sell stock in home builders, depending on how the data comes out. After all, if fewer homes are started, fewer homes will be sold in the future. Politicians, central bankers, and government economists are all watching housing starts for significant changes in the economy. After all, more homes equals more growth. And the main contributing factor of the Great Recession from 2007 to 2009 was the burst in the housing bubble. Because of that burst, housing credit was tight for years, which is why US growth after 2009 was sluggish for many years. Mortgages became tougher to get, fewer homes could be bought, and fewer homes were started. In this manner, you can see that housing starts can be an important leading indicator for an entire economy. So, what's cooking in your region? Are a lot of people starting to build homes?