Unexpected Rise in US Building Permits and Housing Starts

Unexpected Rise in U.S. Building Permits and Housing Starts: Understanding the Difference Between the Two Indicators

The U.S. housing market has recently experienced a surge, with both building permits and housing starts showing significant gains. This article will explore these two key indicators in the housing market and explain the difference between building permits and housing starts. We will also analyze the recent data, where building permits unexpectedly rose from 1.339 million to 1.524 million and housing starts increased from a revised 1.321 million to 1.450 million.

 

Building Permits: A Measure of Future Construction

 

Building permits measure the change in the number of new permits issued by the government for the construction of residential buildings. These permits are required before construction can begin, and are thus considered a key indicator of future housing construction and demand in the housing market.

 

The recent data showed an unexpected rise in building permits from 1.339 million to 1.524 million, surpassing the forecast of 1.340 million. This suggests that there is an increase in demand for new residential construction projects, which could be due to various factors such as population growth, economic conditions, or low-interest rates. The increase in building permits implies that developers and builders are anticipating higher demand in the coming months and are preparing to meet that demand.

 

Housing Starts: A Measure of Actual Construction

 

Housing starts, on the other hand, refer to the number of new residential construction projects that have begun in a given period. This metric is an important indicator of the current state of the housing market, as it reflects the actual commencement of construction activity. A higher number of housing starts signals a robust housing market and strong economic conditions.

 

The recent data indicates that housing starts also posted a noticeable gain, with a revised 1.321 million rising to 1.450 million. This increase surpassed the forecast of 1.310 million, suggesting that the housing market is experiencing a strong period of growth. The growth in housing starts can be attributed to various factors, such as increased demand for housing, improved access to financing, or a general increase in construction activity.

 

The Difference Between Building Permits and Housing Starts

 

While both building permits and housing starts are key indicators of the health of the housing market, they represent different aspects of the market. Building permits act as a leading indicator, providing insight into future construction activity and demand. In contrast, housing starts are a lagging indicator, reflecting the actual commencement of construction projects and the current state of the housing market.