Housing Starts: Highest number of new construction homes since 2008
Brought to you by one of best Realtors on the South Shore, Alice Pierce with Coldwell Banker in Hingham, MA.
Maybe you have heard that the “housing starts are way up.”
We hear the term “housing starts” all the time, usually in radio clips of short duration and without any explanation regarding the term and its relationship to us personally.
Few of us really know how this relates to the residential real estate market in Massachusetts. Many people take the term at face value and assume it means how many new homes have started construction, but it is actually more complex and informative.
Housing Starts Defined
Housing starts is a term that describes the exact quantity of privately owned homes, or housing units, where new construction has commenced within a specific defined time period, usually one month.
The number of new residential construction projects within one months time produces what is called the New Residential Construction Report, also known as housing starts. This report has three separate parts; the number of building permits, actual housing starts and newly completed house construction.
Included in the data are three types of new construction; single-family houses, townhouses or condos, and apartment buildings with five or more units. Each separate apartment is considered a single residence or “start.” So if someone built a building with 25 separate living units this would constitute 30 housing starts.
The information for housing starts is gathered by the U.S. Census Bureau and the Department of Housing and Urban Development using surveys of homebuilders nationwide. The data is then compiled by the U.S. Commerce Department and structured using statistical analyses.
Analysts compare month to month data, and even year to year data much like the Registry of Deeds produces their monthly summaries. The report is released around the 17th of each month by the U.S. Commerce Department.
Housing Starts Reflect our Current Economic Health
But how does the information about new construction inform us regarding the health of the economy? When looking to housing starts to inform us regarding the economic markets. it is the percentage of rise or fall in the numbers from the previous month, year, or year-to-date for each component.
Because of the myriad number of factors that go into new construction of homes, housing starts are believed to be positively correlated with our economy. Consider some of the far reaching factors that go into producing a new home like mortgage lending, banking, manufacturing, materials, jobs, oil to run machinery, the construction itself, and real estate sales and real estate closings.
There is little else that can cover so many areas of spending like housing starts. When our economy is stable and strong, we are more likely to purchase new homes, whereas in an unstable economy, we are less likely to consider new construction.
Other Things Impact Housing Starts
Although the economy has the most impact on housing starts, there are many other things that affect it as well. This is why statistical analysis is needed to adjust housing starts data.
For example, the weather can have a significant impact. The weather is a strong variable in the monthly numbers, but statistical formulas are used to make seasonal adjustments. A natural disaster such as flooding or wildfires also changes the housing starts data. This means that the numbers are not as is, and that there are revisions made within each of the components.
The winter season we had year before last is a good example. There was enough snow to cover the first floor height of many houses in Hingham, and to keep us from leaving our driveways for days on end. This type of weather pattern stopped both new and ongoing construction. What followed was a sharp decline in building permits, completions and starts of new construction.
Without taking the huge amounts of snow into account, and just looking at the numbers in a bubble, one might reach the conclusion that our economy was collapsing leading to financial mistakes and poor trading decisions across the country. Conversely, traders, investors and consumers could become giddy with high expectations once the weather cleared and the housing start numbers exploded. Either scenario is disastrous.
Because of the variables, the U.S. Commerce Department has a disclaimer stating that it can take up to four months of data to come up with a reliable set of indicators.
Current Housing Starts
The U.S. Census Bureau and the Department of Housing and Urban Development recently announced the new residential construction statistics for July 2016.
Some of these numbers were considered very positive and caused an optimistic stir amongst analysts. For example, building permits for privately owned housing units was 0.9% higher than the same time last year.
The numbers for privately owned housing starts in July of 2016 were above the numbers for June of 2016 by 2.1% and when compared to July of 2015 the numbers were 5.6% higher.
Completed new construction in July of 2016 was 3.2% higher when compared to July 2015.
What the Housing Start Buzz is About
The rise in U.S. housing starts and therefore building activity was unexpected in July 2016. Groundbreaking for new building was the highest its been since February of 2016 and there was an increase in investment in residential construction.
This pace is the highest and strongest it has been in five months time, and the financial experts believe the response relates to strong home sales, increased hiring and affordable finance options.
The bottom line is that there is more money being spent to build more new homes since January of 2008. Now that is good news
Summer in Hingham MA is an ideal time to start looking for homes and learning about Hingham’s neighborhoods and their distinctive characteristics. One of the best Realtors in Hingham, Alice Pierce, is the ideal person to show you around Hingham, Cohasset, Scituate, Hull and all of the South Shore towns.
Not only is Alice Pierce a Hingham resident, but she has lived here all of her life and raised her family here, so give her a call at 781-724-7622, anytime. Alice Pierce can also be reach by emailing her, or through her Coldwell Banker real estate website.
Enjoy all the positives of the south shore of Boston. Feel free to contact Coldwell Banker Realtor Alice Pierce through her website, email or telephone 781-724-7622 about articles, community information for Hingham, MA, Cohasset, MA, Hull, MA, Norwell, MA and any other South Shore towns.