Housing StartsHOUST
Housing starts count new residential construction projects begun in a month. Because housing is sensitive to interest rates, the figure is an early sign of how monetary policy is affecting the economy.
Housing starts count how many new homes builders begin in a month. Because most home building and buying runs on borrowed money, the figure reacts early when interest rates change, which makes it a closely watched sign of how monetary policy is reaching the real economy.
- Category
- Fundamentals and Macroeconomics
- Reading time
- 4 min
- Also called
- New residential construction, Housing starts report, Building starts
- Updated
Housing starts in plain words
In the US data, a home counts as started the moment digging begins for its footings or foundation.1
Every unit in an apartment building counts as started at once, when its foundation work begins.1
Interest rates matter on both sides: weaker housing demand means less construction, which in turn drags on the wider economy.2
How to read a housing starts release
Check the units
Read the headline as a seasonally adjusted annual pace, in thousands of units — not a raw monthly count.1
Split single-family and multifamily
Expect jumps from apartment buildings, since all their units count as started together.1
Compare with permits
Permits are issued before digging, so they hint at future starts.
Look at the trend
Use a three-month average; single months are noisy and get revised.
Link to rates
Watch short-term rates, which drive builders' financing costs.2
Read the wider signal
Falling construction can drag on growth, since lower housing construction lowers aggregate demand in the economy.2
Worked examples
Example 1 — Annual rate
Annualised paceA hypothetical month shows 110 thousand units actually started, reported at a seasonally adjusted annual rate.
| Monthly units (hypothetical) | 110 thousand |
| Annual rate shown | about 1,320 thousand |
The headline is an annualised pace, which is why FRED lists the series as a Seasonally Adjusted Annual Rate.1
Example 2 — Apartment block
Lumpy dataA hypothetical builder digs foundations for a 200-unit block in one month.
| Units counted that month | 200 |
| Next month | 0 from this block |
All 200 flats count in one month because the whole building starts when the foundation is dug.1
Example 3 — Rate rise
Construction slowsHypothetical mortgage rates rise 1.5 percentage points and starts fall from 1,500 to 1,250 thousand.
| Rate change | +1.5 pp |
| Starts | −17% |
Lower demand for homes led to less building — the usual chain of cause and effect.2
Housing starts vs building permits
| Aspect | Housing starts | Building permits |
|---|---|---|
| What it counts | Construction begun | Authorisations issued |
| Timing | When digging begins | Before digging |
| Signal type | Current activity | Pipeline ahead |
| Noise | High, weather-sensitive | Somewhat smoother |
Where housing starts are used
Rate watching
Gauge how Interest Rate changes reach the economy.
Growth forecasting
Residential building feeds into Gross Domestic Product.
Sector analysis
Homebuilder and materials stocks react to the Economic Indicator.
Mortgage markets
Construction trends affect Mortgage- and Asset-Backed Securities supply.
Advantages and disadvantages
Advantages
- Responds early to changes in borrowing costs.
- Published monthly with long history.
- Clear, precise definition of a start.
- Useful leading signal for construction jobs.
Disadvantages
- Very noisy month to month.
- Weather and seasons distort raw data.
- Multifamily projects make it lumpy.
- Revisions can change the picture.
Going deeper
Read as far as you need. Each level builds on the one before it.
What counts as a start
Beginner
A start is recorded when ground is broken for the foundation.1 Plans and permits alone do not count.
Seasonal adjustment and annual rates
Intermediate
Figures are seasonally adjusted annual rates in thousands, so a reading of 1,400 means a pace of about 1.4 million homes a year.1
Common mistakes
Reading the headline as a monthly count
It is an annualised rate.
Overreacting to one month
Use averages and wait for revisions.
Ignoring the multifamily split
Big blocks can swing the total.
Assuming every country measures it the same way
Definitions and release schedules differ by country.
Check your understanding
Test yourself before moving on. Each answer comes with an explanation.
Key points to remember
- Housing starts count new homes begun in a month.
- A start is recorded when foundation digging begins.
- The headline is a seasonally adjusted annual rate.
- Housing is very sensitive to interest rates.
- Use trends, not single months.
Frequently asked questions
Are housing starts the same as home sales?
Why is the number so large?
Do other countries publish housing starts?
Further learning
- Economic Indicator
How data releases fit together.
- Interest Rate
The main driver of housing activity.
- Leading and Lagging Indicators
Where starts sit in the cycle.
- Federal Reserve
Who sets US short-term rates.
Sources
This article is written in our own words. The sources below support the specific facts, rules and figures marked with a number in the text. Links open the original publisher’s page.
- Federal Reserve Bank of St. Louis (FRED). New Privately-Owned Housing Units Started: Total Units (HOUST) (opens in a new tab) Checked .
- Board of Governors of the Federal Reserve System. Housing and the Monetary Transmission Mechanism (FEDS 2007-40, Frederic S. Mishkin) (opens in a new tab) Checked .
Educational content, not financial advice. Examples use hypothetical prices and simplified costs; actual fees, margin rules and regulations vary by broker, market and country. We are not affiliated with any publisher linked above. Last reviewed . Report an error or request a source credit.