| Consensus | Consensus Range | Actual | Previous | Revised | |
|---|---|---|---|---|---|
| Starts - Annual Rate | 1.455M | 1.420M to 1.510M | 1.452M | 1.434M | 1.398M |
| Permits - Annual Rate | 1.464M | 1.450M to 1.496M | 1.442M | 1.440M | 1.441M |
Highlights
Starts of new homes are up 3.9 percent to 1.452 million units at a seasonally adjusted annual rate in July after a downward revision to 1.398 million units in June. The July pace of starts is not materially different than the consensus of 1.455 million units in the Econoday survey of forecasters. The increase is entirely due to a gain of 6.7 percent in single-family home starts in July to 983,000 after 921,000 in June. Starts of multi-unit homes had been the main support of homebuilding in the second half of 2022 and early 2023, but have begun to wane. Starts of multi-unit homes are down 1.7 percent in July to 469,000 after 477,000 in June, and are the lowest since 466,000 in September 2021.
Total starts of new homes are up 5.9 percent from July 2022. Starts of single-family homes are up 9.5 percent year-over-year, while multi-units home starts are down 0.8 percent year-over-year. If rising mortgage rates are once again cooling the housing market, homebuilders continue to see demand while the stock of existing homes for sale remains limited.
Permits issued are virtually unchanged in July from June with a 0.1 percent rise to 1.442 million units after 1.441 million units in the prior month. The level in July is below the consensus of 1.464 million units in the Econoday survey of forecasters. Permits issued for single-family homes are up 0.6 percent to 930,000 in July after 924,000 in June. Permits for multi-units are down 1.0 percent to 512,000 in July from 517,000 in June. Homebuilders are likely to see permits that would fuel future construction remain on the soft side while current mortgage rates make homes less affordable to buy.
Total permits issued are down 13.0 percent year-over-year in July. However, permits for single-family homes are up 1.3 percent from July 2022. Multi-unit permits are down 30.8 percent year-over-year in July. Builders are again shifting their projects to where demand is highest. An exodus of renters to homeownership helped keep demand for multi-units up, but it is now the single-family market where builders see more opportunities.
Total starts of new homes are up 5.9 percent from July 2022. Starts of single-family homes are up 9.5 percent year-over-year, while multi-units home starts are down 0.8 percent year-over-year. If rising mortgage rates are once again cooling the housing market, homebuilders continue to see demand while the stock of existing homes for sale remains limited.
Permits issued are virtually unchanged in July from June with a 0.1 percent rise to 1.442 million units after 1.441 million units in the prior month. The level in July is below the consensus of 1.464 million units in the Econoday survey of forecasters. Permits issued for single-family homes are up 0.6 percent to 930,000 in July after 924,000 in June. Permits for multi-units are down 1.0 percent to 512,000 in July from 517,000 in June. Homebuilders are likely to see permits that would fuel future construction remain on the soft side while current mortgage rates make homes less affordable to buy.
Total permits issued are down 13.0 percent year-over-year in July. However, permits for single-family homes are up 1.3 percent from July 2022. Multi-unit permits are down 30.8 percent year-over-year in July. Builders are again shifting their projects to where demand is highest. An exodus of renters to homeownership helped keep demand for multi-units up, but it is now the single-family market where builders see more opportunities.
Market Consensus Before Announcement
After slowing from 1.559 million in May to 1.434 million in June, housing starts in July are expected to post a limited rebound to a 1.455 million annualized rate. Permits, which slowed from 1.496 to 1.440 million in June, are similarly expected to rise to 1.464 million.
Definition
Housing starts measure the initial construction of single-family and multi-family units on a monthly basis. Data on permits provide indications of future construction. A housing start is registered at the start of construction of a new building intended primarily as a residential building. The start of construction is defined as the beginning of excavation of the foundation for the building.
Description
Two words: Ripple Effect. This narrow piece of data has a powerful multiplier effect through the economy, and therefore across the markets and your investments. By tracking economic data such as housing starts, investors can gain specific investment ideas as well as broad guidance for managing a portfolio.
Home builders usually don't start a house unless they are fairly confident it will sell upon or before its completion. Changes in the rate of housing starts tell us a lot about demand for homes and the outlook for the construction industry. Furthermore, each time a new home is started, construction employment rises, and income will be pumped back into the economy. Once the home is sold, it generates revenues for the home builder and a myriad of consumption opportunities for the buyer. Refrigerators, washers and dryers, furniture, and landscaping are just a few things new home buyers might spend money on, so the economic"ripple effect" can be substantial especially when you think of it in terms of more than a hundred thousand new households around the country doing this every month.
Since the economic backdrop is the most pervasive influence on financial markets, housing starts have a direct bearing on stocks, bonds and commodities. In a more specific sense, trends in the housing starts data carry valuable clues for the stocks of home builders, mortgage lenders, and home furnishings companies. Commodity prices such as lumber are also very sensitive to housing industry trends.
Importance
The housing starts report is the most closely followed report on the housing sector. Housing starts reflect the commitment of builders to new construction activity. Purchases of household furnishings and appliances quickly follow.
Interpretation
The bond market will rally when housing starts decrease, but bond prices will fall when housing starts post healthy gains. A strong housing market is bullish for the stock market because the ripple effect of housing to consumer durable purchases spurs corporate profits. In turn, low interest rates encourage housing construction.
The level as well as changes in housing starts reveals residential construction trends. Housing starts are subject to substantial monthly volatility, especially during winter months. It takes several months to establish a trend. Thus, it is useful to look at a 5-month moving average (centered) of housing starts.
It is useful to examine the trends in construction activity for single homes and multi-family units separately because they can deviate significantly. Single-family home-building is larger and less volatile than multi-family construction. It is more sensitive to interest rate changes and less speculative in nature. The construction of multi-family units can be substantially influenced by changes in the tax code and speculative real estate investors.
Housing construction varies by region as well. The regions of the United States do not all follow exactly the same economic patterns because industry concentration varies in the four major regions of the country. The regional dispersion can mask underlying trends. The total level of housing construction as well as the regional distribution of housing construction is important.
Housing permits are released together with housing starts every month and are considered a leading indicator of starts. In reality, housing permits and starts typically move in tandem each month. However, there are some exceptions. For instance, if permits are issued late in the month, and weather does not permit immediate excavation, then permits might lead starts. For the most part, though, permits are not a good predictor of future housing starts. Incidentally, housing permits (but not starts) are one of the ten components of the index of leading indicators compiled by The Conference Board.
Home builders usually don't start a house unless they are fairly confident it will sell upon or before its completion. Changes in the rate of housing starts tell us a lot about demand for homes and the outlook for the construction industry. Furthermore, each time a new home is started, construction employment rises, and income will be pumped back into the economy. Once the home is sold, it generates revenues for the home builder and a myriad of consumption opportunities for the buyer. Refrigerators, washers and dryers, furniture, and landscaping are just a few things new home buyers might spend money on, so the economic"ripple effect" can be substantial especially when you think of it in terms of more than a hundred thousand new households around the country doing this every month.
Since the economic backdrop is the most pervasive influence on financial markets, housing starts have a direct bearing on stocks, bonds and commodities. In a more specific sense, trends in the housing starts data carry valuable clues for the stocks of home builders, mortgage lenders, and home furnishings companies. Commodity prices such as lumber are also very sensitive to housing industry trends.
Importance
The housing starts report is the most closely followed report on the housing sector. Housing starts reflect the commitment of builders to new construction activity. Purchases of household furnishings and appliances quickly follow.
Interpretation
The bond market will rally when housing starts decrease, but bond prices will fall when housing starts post healthy gains. A strong housing market is bullish for the stock market because the ripple effect of housing to consumer durable purchases spurs corporate profits. In turn, low interest rates encourage housing construction.
The level as well as changes in housing starts reveals residential construction trends. Housing starts are subject to substantial monthly volatility, especially during winter months. It takes several months to establish a trend. Thus, it is useful to look at a 5-month moving average (centered) of housing starts.
It is useful to examine the trends in construction activity for single homes and multi-family units separately because they can deviate significantly. Single-family home-building is larger and less volatile than multi-family construction. It is more sensitive to interest rate changes and less speculative in nature. The construction of multi-family units can be substantially influenced by changes in the tax code and speculative real estate investors.
Housing construction varies by region as well. The regions of the United States do not all follow exactly the same economic patterns because industry concentration varies in the four major regions of the country. The regional dispersion can mask underlying trends. The total level of housing construction as well as the regional distribution of housing construction is important.
Housing permits are released together with housing starts every month and are considered a leading indicator of starts. In reality, housing permits and starts typically move in tandem each month. However, there are some exceptions. For instance, if permits are issued late in the month, and weather does not permit immediate excavation, then permits might lead starts. For the most part, though, permits are not a good predictor of future housing starts. Incidentally, housing permits (but not starts) are one of the ten components of the index of leading indicators compiled by The Conference Board.
