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The housing starts and building permits report is released three weeks after the reference month. Housing starts are divided into single-family and multi-family categories. A start is counted when the excavation begins. A single-family start counts as one, while each unit in a multi-family structure counts as one start.

Building permits data are collected along with housing starts from a monthly survey of 8,500 of a possible 19,000 permit users. The vast majority of permits relate to single-family units. Construction of housing units authorized by permits typically start during the month of issuance. The remainder typically begin within the next three months.

Housing starts are sensitive to interest rates (mortgage rates) and weather conditions, so information on these items will allow one to gauge how strong starts may be. Housing starts are a leading indicator of residential construction, which only accounts for 5% of the economy, but has significant spin-offs to housing-related sales such as furniture and appliances. Building permits are included in the Conference Board’s Index of Leading Economic Indicators..

The level of housing starts and building permits can be irregular, thus it is better to look at the most recent data in relation to the 3-month and 12-month averages. A number above the 3-month and 12-month average shows that starts are very strong.

As the housing market is typically very sensitive to interest rates, starts and permits are closely followed for signs that interest rate cuts are having an “impact” on the economy. During periods of higher interest rates, one would expect starts and permits to slow or decline and for the broader economy to follow.