The Housing Starts and the Building Permits are both believed to be the leading economic indicators for the economy of any country. The source of these reports is The Census Bureau of the Department of Commerce and they are issued on or around 17th of each month.
The Housing Starts Report is considered as the number of private houses (technically housing units) on which construction has been started over a specific period of time. This is an important economic indicator as it is a clear indication of the money in general public’s possession. If there is a decrease in the housing starts, it clearly indicates that less money is being inducted in the economy. Vice versa, if more houses start, it means that more money is being introduced by the public in housing sector. At the same time the increase in Housing Starts means that the Federal Fund Rate is low enough for individuals to be willing to borrow money from the banks.
Building Permits are the permits which are required in order to permit excavation. Whenever there is a reduction in the mortgage rates, an increase in building permits as well as the house starts is observed within a few months time. Permits are followed by the starts. In some areas of the country, the permits are not required, thus the level of permits remains less than the level of starts over a period. This remains a major reason because of which the housing starts and the building permits do not match over the years.
Another reason for this difference in permit to start relationship is that at times the construction is dumped after the issuance of permits but before the launch of construction. The change of plan from the builder’s side also affects this relationship when they make an alteration in diagram after issuance of original permits. Specifically in apartment buildings, the ultimate number of houses may be more or less than initially planned and permitted.
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