Fewer new residential construction projects have gotten started in 2018. According to the U.S. Commerce Department, national housing starts fell nearly 3 percent this year. This major economic indicator could signal the beginning of a slowdown in the construction industry.
Yearly Statistics Show Mixed Results
New residential construction may be decreasing after a long period of growth. In September, housing starts fell 5.3 percent from the month before. However, a rise of 1.5 percent in October shows an overall mixed forecast for the housing industry.
‘Not a Surprise’
“This month’s decrease in single-family starts isn’t a surprise given the drop in our builder confidence index,” said National Association of Home Builders Chairman Randy Noel. “Builders are showing caution as mounting housing affordability concerns are forcing some consumers to delay making a home purchase.”
However, the recent downturn is not likely to be a long-term construction trend.
‘Single-Family Starts Were Strong’
“Single-family starts were strong at the beginning of the year, but weakened this summer and have remained soft,” said NAHB Chief Economist Robert Dietz. “Despite this softness, 2018 construction volume is set to be the best since the downturn. A growing economy and positive demographic tailwinds are supporting housing demand as interest rates rise. However, policymakers should take note of the November decline in builder confidence as a sign that housing affordability conditions will weigh on the housing market going forward.”
What are Housing Starts?
Housing starts are a major U.S. economic indicator that tracks the number of new residential construction projects that have begun in a given month. It is an important factor in the calculation of the strength of the economy from New York to California to Texas.
The U.S. Commerce Department’s monthly report is a survey of American home builders’ activity. The results include not only shovels in the ground, but building permits, types of dwellings built and housing completions.
The housing starts data is used to make projections in the construction industry and beyond. Fewer single-family units built might indicate decreased demand for construction work or even the possibility of a future housing supply shortage.