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Housing Starts
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Housing Starts
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Diagrams and Data
Explore further current and historical data for housing starts and how it relates to the real GDP, 30-year mortgage rate, and real wages.
Current and Historical Data for Housing Starts
Review the current and historical data for housing starts by month at Economagic.com.
Housing Starts and Real GDP: Annual Percent Change Relative to Same Period Last Year
One can see in the diagram and data table given below that housing starts are a volatile leading indicator of real GDP. Housing starts generally rose approximately mid-way into each of the four U.S. recessions since 1980, well in advance of the economic recovery and rise in real GDP. One can also see that housing starts dropped sharply well before the economic downturn and decline in real GDP during the recessions shown in the diagram. Housing Starts dropped in the last two quarters of 2000, providing advance indication of the sharp downturn in economic growth that occurred in 2001. Housing starts experienced a modest rebound in 2002 and 2003 due to low mortgage interest rates, a moderate economic recovery, and the perception that housing is a safer haven than the stock market for preserving wealth.
Economagic.com provides a more complete collection of data for the following:
Housing Starts -- Seasonally Adjusted I Real GDP
Housing Starts and 30-Year Mortgage Rates: Annual Percent Change Relative to Same Period Last Year
Housing starts are highly sensitive to mortgage interest rates, and in fact are far more volatile than interest rates. The inverse relationship between interest rates and housing starts is evident in the diagram given below. Notice that when mortgage interest rates increased--indicated by the curve for annual percent change in mortgage interest rates rising above zero--housing starts plunged. Conversely when mortgage interest rates declined, housing starts rose. Despite the economic recession in the last quarter of 2001, housing starts increased slightly, due in part to falling mortgage interest rates. Mortgage interest rates continued to decline through the first quarter of 2003 due to reduced business demand for credit and increased investor demand for bonds, which reduces yield (see the bond entry in EconData for more). Mortgage rates began increasing in 2003 due to the strengthening economy and improvements in the stock market, which has reduced demand for bonds and increased yields.
Economagic.com provides a more complete collection of data for the following:
30-Year Federal Home Loan Mortgage Corporation Rate
Housing Starts -- Seasonally Adjusted I 30-Year FHA Mortgage Rate
Housing Starts and Real Compensation Per Hour: Annual Percent Change Relative to Same Period Last Year
We would expect that new residential housing would be a normal good, and so microeconomic theory would lead us to believe that a rise in real wages would generate an increase in the demand for new homes, all else equal. The data presented in the diagram below are supportive of this notion. Note that times of rising real wages are associated with increasing housing starts, while times of declining real wages are associated with declining housing starts. Housing starts are a good indication of consumer confidence, as most people will not generally make large investments in things such as new homes in times of economic uncertainty. While real compensation increased slowly in 2002 and the first two quarters of 2003, despite the continued weak economy, (due in part ot tax cuts), the demand for housing remained relatively strong (see the caption to the first diagram above for details).
Economagic.com provides a more complete collection of data for the following:
Housing Starts -- Seasonally Adjusted I Real Compensation Per Hour
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