Analyzing housing starts in November
Fed's statement moved Treasuries for the week ending December 19 (Part 5 of 9)
Housing starts
In the US, housing starts declined 1.6% to a 1.028 million pace in November. For October, the pace was revised to 1.045 million. Housing starts measure the number of units of privately-owned housing started in a given period. It includes single-family and multiple-family homes. Multiple-family homes dominate the private-housing market. To learn more about housing starts, read Homebuilder must-know: July 2014’s starts, sales, and prices.
Information from this indicator is used to anticipate the future production for homebuilders, the future demand for raw materials, and labor costs. This affects home-related retailers like Lowe’s (LOW) and Home Depot (HD).
Details
The South was the only region that saw a decrease in total housing starts. Total housing starts were down 19.5% from last month. The West saw the largest rise of 28.1% in November. It was followed by the Midwest. It saw a rise of 14.4%.
Construction started to fall for single-family homes. It fell by 5.4% in November—compared to October. Structures with five or more units saw a rise of 7.6%. The fastest pace for single-family homes in this segment was set by the Northeast region. It reported a 9.1% rise. The South saw the pace decrease in this segment. It slowed by 10.3%—the largest among the four regions.
Building permits
Building permits indicate future demand for housing. They’re released in the monthly report. Permits for new construction of private homes fell 5.2% from last month to 1.035 million. While single-family permits fell 1.2%, constructions with five or more units fell 11.1%. The South had the most declines in overall permits. Permits fell 10% from last month. For single-family home permits, the Midwest saw the biggest decline of 11%.
Housing starts and building permits are leading indicators for the housing market. Since they’re focused on real estate or construction, the following ETFs are affected—the iShares Dow Jones US Real Estate Index Fund (IYR), the Vanguard REIT ETF (VNQ), the SPDR S&P Homebuilders ETF (XHB), and the iShares Dow Jones US Home Construction Index Fund (ITB).
Due to their importance for the housing market, building permits are part of the Leading Economic Index. The index is calculated by the Conference Board.
In the next part of this series, we’ll look at the status of foreigners’ holdings of US securities.
Browse this series on Market Realist: