The Housing Starts Report measures the pace of new residential construction in the United States. It focuses on 2 key indicators:
- Building Permits: Approvals issued by local authorities that authorize future construction projects. Building permits reveal what builders are planning to construct, offering valuable insight into future economic activity and developer sentiment
- Housing Starts: The number of new homes where construction has officially begun, often marked by the foundation being poured. Housing starts reflect the current level of building activity and serve as a real-time indicator of builder confidence and market momentum
Interpreting the Numbers
July’s numbers tell two stories. On one hand, builders are pressing ahead with current projects despite high borrowing costs, showing resilient housing demand. At the same time, fewer permits suggest caution for future building activity as builders start to weigh higher financing costs and an uncertain economic outlook, raising questions about the sustainability of current activity.
Near-Term Economic Boost
Housing starts activity generates an immediate boost to the economy through:
- Direct construction employment and related wages
- Consumer spending on housing-related goods and services
- Supply chain activity from materials to labor
Long-Term Outlook
The drop in permits raises concerns about the pipeline for future construction. With housing’s broad economic influence, fewer permits could signal slower economic growth in the months ahead. With the FED meeting on September 17th, interest rate decisions will play a key role: keeping rates high could slow housing further, while a shift towards cuts may stabilize future growth.”
Disclosure
Source is U.S. Census Bureau and U.S. Department of Housing and Urban Development
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