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.
Source: Bureau of the Census of the U.S. Department of Commerce
Availability: Two to three weeks following the reported month
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
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
Housing data can have a significant impact on the bond market. A stronger-than-expected
viewed negatively, suggesting strong growth and possible inflationary side-effects. A weak report has
the opposite effect on the market.
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.