Each month, in conjunction with the Department of Housing and Urban Development, the Census Bureau releases its New Residential Construction report. The report is comprised of several sections, one of which counts the number of homes that have “broken ground” in Ohio and nationwide.

They’re called “Housing Starts” and, by most measures, they faded quickly as 2010 came to a close.

According to the Census Bureau’s report, Housing Starts of single-family homes fell to 417,000 units on a seasonally-adjusted, annual basis. The figure marks a 9 percent drop-off from November, and is the lowest reading since May 2009.

Not surprisingly, the press went bearish on housing post-release:

• U.S. Home Building Stuck Near 50-Year Lows (AFP)
• Housing Starts Slowed Sharply In December (New York Times)
• Housing Starts Fall In December To One-Year Low (Bloomberg)

Despite being truthful, these headlines are somewhat misleading. They each ignore a key element of December’s New Residential Construction report — Building Permits. Building Permits rose 6 percent to an 8-month high last month.

A building permit is a local-government certification that authorizes home construction. 

Permits are a precursor to Housing Starts with 82% of homes starting construction within 60 days of permit-issuance. More permits in December, therefore, should lead to more Housing Starts in January and February.

It’s unclear whether permits were up because the economy was improving, or because builders raced to beat new building code for 2011. Regardless, expect additional “new home” supplies this spring which would ordinarily help home prices drop if not for the normal surge in spring buyers to gobble those new homes up.

Look for home prices to stay flat, but with rising mortgage rates contributing to higher costs of homeownership overall.

The number of single-family Housing Starts increased in November, adding 30,000 units as compared to October.

The Census Bureau defines a “housing start” as a home on which construction has started.

November’s starts represents a 7 percent increase from the month prior. However, if you see the Housing Starts story online or in the papers, you’ll notice that the press is calling the market gain at 4 percent.

So which result is right? The answer is both.

The government’s monthly Housing Starts data is published as a composite report; lumping activity among 3 separate housing types into a single, group reading.

The 3 housing types are:

1. Single-family homes (i.e. 1-unit)
2. Multi-unit homes (i.e. 2-4 units)
3. Apartments (5 units or more)

The group reading is a fair description of the market and it’s easy-to-understand. As a result, it’s what the press tends to report. However, for home buyers in Ohio , it’s the single-family category that’s most relevant.

The reason why single-family homes accounted for 84% of November’s Housing Starts is because that’s the type of home that most buyers buy. Few purchase 2-4 unit properties, and even fewer buy entire apartment complexes.

That said, it’s possible that November’s Housing Starts data is wrong. Within the press release, the government placed an asterisk next to the data, indicating that the figure’s margin of error exceeds its actual measurement.

Against a 7 percent gain, the reported margin of error is 13.5%. There is no statistical evidence, therefore, to prove the actual change was different from zero.

If Housing Starts did fall in November, it will help to reduce the Cincinnati housing inventory, which will, in turn, help keep home prices high. For home sellers, this could mean good news. Fewer homes for sale increase competition among buyers.

Newspaper stories can be misleading sometimes — especially with respect to real estate. We saw a terrific example of this Wednesday.

A “Housing Start” is a privately-owned home on which construction has started and, according to the Commerce Department’s October 2010 data, Housing Starts data dropped by nearly 12 percent as compared to September.

The media jumped on the story, and its negative implications for the housing market overall.

A sampling of the headlines included:

• Housing Starts Plunge: Market’s ‘Pulse is Faint’ (WSJ)
• Housing Starts Tumble (Reuters)
• Housing Starts Sink 11.7 Percent In October (NPR)

Although factually correct, the headlines are misleading. Yes, Housing Starts fell sharply in October, but if we strip out the volatile “5 or more units” portion of the data — a grouping that includes apartment buildings and condominiums — Housing Starts only fell 1 percent.

That’s a big difference. Especially because most new construction buyers in Cincinnati and around the country don’t purchase entire condo buildings. They buy single-family residences.

As an illustration, 84% of October’s Housing Starts were single-family homes. The remaining starts were multi-units.

This is why the headlines don’t tell the whole story. The market that matters most to buyers — the single-family market — gets completely glossed over. The Housing Starts reading wasn’t nearly as awful as the papers would have you believe.  Furthermore, it’s never mentioned that single-family Housing Permits climbed 1 percent last month, either.

According to the Census Bureau, 82% of homes start construction within 60 days of permit-issuance. Therefore, we can expect December’s starts to be higher, too.

According to the Commerce Department, the number of single-family Housing Starts increased to 452,000 units in September, a 19,000 improvement over August.

A “housing start” is a new home on which construction has started.

Housing Starts data is surveyed and broken-down by housing type:

1. Single-Family Housing Starts
2. Multi-Unit Housing Starts (2-4 Units)
3. Apartment Building Housing Starts (5 or more units)

The government logs each type separately, but also lumps them into a single, comprehensive figure within its reports. For this reason, headlines surrounding the story seem contradictory.

For example:

• Marketwatch : Housing starts rise for 3rd straight month, up 0.3%
• CNN : Housing starts jump to 5-month high

It’s single-family homes that most Americans purchase, though, and that’s why single-family starts are the numbers worth watching. As 75% of the market, it’s more relevant than the joint numbers most commonly reported by the press.

In September, single-family starts did move to a 5-month high but buyers and sellers in Cincinnati should keep the figures in perspective. Just because starts are rising doesn’t mean the housing sector has turned around for good.

The first reason why is because, in September, starts were 75 percent less as compared to 5 years ago at the peak of housing. And if you feel that’s an unfair comparison, even as compared to the last 12 months, September’s data was tens of thousands below average.

Second, September’s Margin of Error happened to exceed its actual measurement. This means that the 4 percent in starts may actually turn out to be a loss of 4 percent (or more!) once the data is collected in full.

If there’s a reason to think the New Homes market is coming back, though, it’s that home builder confidence is also at a 5-month high. Foot traffic is rising and builders are optimistic about the next six months.  This could mean higher sales prices and less chance for negotiation.

Buyers in search of new homes may find it tougher to make a deal the closer we get to 2011.

The number of single-family Housing Starts rebounded in August, climbing 4 percent from July’s 14-month low.

A “Housing Start” is defined as a home on which construction has started and the August increase represents 18,000 single-family units nationwide.

If you only read the headlines, however, you would think the data was stronger. This is because the Housing Starts data is actually a composite of 3 types of homes — single-family, multi-family, and apartments — but  the press tends to lump them all three together.

As a sampling, here are a some headlines on the story:

• US Stock Futures Rise After Housing Starts Surge (WSJ)
• Housing Starts At 4-Month High, Hint At Stability (Fox)
• Housing Starts Jump 10.5% In August (Marketwatch)

Now, it’s not that the news is wrong, per se, it’s just not necessarily relevant.  Few home buyers  in Cincinnati are buying multi-family homes or entire apartment complexes. Most buy single-family and, for the first time since April, single-family starts are on the rise — just not by as much as you’d believe from the papers.

Even still, we can’t be entirely sure that the August Housing Starts data is accurate anyway.

A footnote in the Department of Commerce report shows that, although single-family starts are said to have increased 4 percent, the data’s margin of error exceeds its actual measurement, meaning the data has “zero confidence”.

In other words, starts may have dropped in August, but it’s something we won’t know for sure until revisions are made later this year.

Sometimes, you need to look deeper than the headlines to get the news that matters. This basic truth’s latest example comes from the July Housing Starts data, as published by the U.S. Census Bureau.

According to the newspapers, Housing Starts improved last month:

• US Housing Starts Make Modest Rebound (FT)
• Housing Starts Rise Slightly (MoneyWatch)
• Housing Starts Tick Higher In July (MarketWatch)

However, these stories are speaking in terms of all housing starts — not just the single-family ones. This is a major point of difference for home buyers in Cincinnati because the most people don’t buy the multi-unit homes and apartment buildings that’s also a part of the Housing Starts data. 

The overwhelming majority of buyers buy single-family homes and in July, as in the previous 3 months, the number of single-family housing starts fell.

In fact, single-family housing starts are down by nearly 25 percent since April and are now at their lowest levels since May 2009.

This is a much different message from the headlines above.

It’s not surprising that single-family housing starts are down; builder confidence is down as well and the two metrics tend to trend in the same direction.

Furthermore, building permits for single-family homes fell in July, too.

As a home buyer, the drop in Housing Starts should help reduce housing inventory in the months ahead.  This may lead home prices to rise because home values are based on supply and demand.  For home sellers, falling starts should help reduce competition for buyers.

Each real estate market is unique and supply levels will vary from ZIP code to ZIP code. For up-to-the-minute inventory levels, make sure to talk with your real estate agent.

Single-family Housing Starts eased lower last month, falling by 0.7 percent from May, or 3,000 units nationwide.

A “housing start” is a home on which construction has started.

June’s Housing Starts data is somewhat soft and may partially explain why home builder confidence dropped to its lowest level since April 2009, but for buyers and sellers in Cincinnati , the Housing Starts report is not nearly as bad as headlines say.

This is because when the press reports on Housing Starts, it doesn’t single out single-family homes. The press lumps every type of home into a single, giant reading. As a result, news outlets are reporting Housing Starts down 5 percent — a somewhat misleading figure.

The 5 percent figure is actually a combination of 3 separate housing types:

1. Single-Family Housing Starts
2. Multi-Unit Housing Starts (2-4 Units)
3. Apartment Building Housing Starts (5 or more units)

But, single-family homes are what most Americans purchase. This is why the single-family starts data is more relevant than the combined figure commonly reported by the press. 2-4 units and apartment buildings are a different realm of buyer.

That said, though, we can’t even be sure that June’s Single-Family Housing Starts report is accurate. As noted in the Department of Commerce’s press release, the data’s margin of error is 10.7 percent which means the reported results are of “no confidence”.

In other words, there is no statistical evidence to prove the actual change was different from zero.

If Housing Starts did, in fact, drop in June, it will help to reduce the Indian Hill housing inventory, which will provide support for local home values. For home sellers, this could be good news. Fewer homes for sale means less competition for buyers.

Single-family housing starts plummeted to a one-year low in May, just 30 days after soaring to a 20-month high.  It’s no wonder home builders are confused.

Against a revised April figure, Housing Starts fell 97,000 units in May, a figure representing almost one-fifth of the total market size.

It’s the worst showing for Housing Starts since May 2009, a surprise to builders and economists alike.

Furthermore, single-family Building Permits plunged in May, too — down 10 percent from April. A permit is a certification from local government that authorizes home construction.

Housing permits are a precursor to Housing Starts with 82% of homes starting construction within 60 days of permit-issuance. Fewer permits, therefore, directly reduces the number of new homes coming to market in the coming months.

For home buyers in Cincinnati , this should create a sense of urgency.

Home prices are based on supply and demand and supply appears to be falling about the same time that economists predict a surge in home demand.  It could spell rising home prices and a complete loss of negotiation power with home sellers.

For now, though, home affordability remains high with properties cheap and mortgage rates near all-time lows. If you plan to buy a home later this year, the May 2010 Housing Starts data may be a reason to move up your timeframe a bit.

After a strong March showing and a surprise upward-revision for February, Housing Starts are, once again, trending better.

It’s yet another signal that the housing market in Cincinnati and nationwide is stabilized.

A Housing Start is a new home on which construction has started and, over the last 6 months, home builders are averaging one half-million starts per month.

This marks the highest 6-month average since 2008 and a reading one-fifth percent better from 12 months ago.  Revisions to prior data have all been higher, too.

Even more interesting, though, is that the number of newly-issued building permits is exploding. Permits were up more than 5 percent last month and have climbed back to the levels of late-2008.

Housing permits are an important data point in housing because permits are precursors to actual housing starts.  According to the Census Bureau, 82% of homes start construction within 60 days of permit-issuance.

Therefore, because March’s housing permits increased, we should expect Housing Starts to continue to rise into the early months of summer.

This, too, reflects well on housing because the federal home buyer tax credit won’t be in existence this summer. The simple fact the homes are being built now shows that housing is likely to expand even after the tax credit expires.

Non-military members must be under contract by April 30, 2010 and closed by June 30, 2010 in order to claim up to $8,000 in federal tax credits.

Single-family Housing Starts idled last month, dropping just 3,000 units from the month prior, or 0.2%.

According to the Commerce Department’s report, February marked the 8th straight month in which Housing Starts straddled the half-million marker, dating back to June 2009.

This is a different slant on the Housing Starts story as told by the press.

Most publications are reporting that Housing Starts fell 5.9 percent in February. Technically, this is true.  Housing Starts did fall 5.9 percent last month.  However, the Housing Starts data is comprised of three parts:

1. Single-Family Housing Starts
2. 2-4 Unit Housing Starts
3. “Apartment Building” Housing Starts (i.e. 5 or more units)

The press tends to lump all 3 together but that’s not relevant for everyday homeowners and buyers. 

2-4 unit homes, and apartments and condos are a different housing class as compared to single-family homes and are notoriously volatile, too.  Single-family starts are more steady and better reflect the country’s housing stock.

Single-family housing starts are up 32 percent over the last 12 months. 

Meanwhile, the pace of new buyers has not kept up with the pace of new housing stock. Therefore, because home prices are based on supply-and-demand, the price for a newly-built home was down, on average, 7 percent nationwide in January.

With the federal home buyer tax credit expiring soon, home buyers in Cincinnati will likely create new demand for homes. And with Housing Starts holding steady near 500,000, that should push prices higher through the spring months.

Sometimes, headlines for housing can be misleading and this week gave us a terrific example.

On Wednesday, the Commerce Department released its Housing Starts data for January 2010. The data showed starts at a 6-month high.

A “Housing Start” is a privately-owned home on which construction has started.

Headlines on the Housing Starts story included:

• U.S. Housing Starts Hit 6-Month High (Reuters)
• U.S. Economy Receives Home Building Boost (Shepparton)
• Housing Starts Post Sharp Rebound (ABC)

Based to the headlines, the housing market looks poised for rapid growth through the Spring Market.

The real story, though, is that although Housing Starts increased by close to 3 percent last month, the growth is mostly attributed to buildings with 5 or more units.  This includes apartments and condominiums — a sector of the housing market that’s notoriously volatile.

If we isolate Housing Starts for single-family homes only, we see that starts grew by just 7,000 units last month and have failed to break a range since June 2009.  January’s tally is slightly below the 8-month average.

Perhaps more interesting than the Housing Starts, though, is the Commerce Department’s accompanying data for Housing Permits. After a 5-month plateau that ended in November, Housing Permits posted multi-year highs for the second straight month.

According to the Census Bureau, 82% of homes start construction within 60 days of permit-issuance.

One reason permits are up is that home builders want to capitalize on the federal homebuyer tax credit’s dwindling time frame.  Sales are expected to spike in March and April and more homes will come online to deal with that demand. Home buyers in Cincinnati should shop carefully, but with an eye on the clock.

As the tax credit’s April 30, 2010 deadline approaches, competition for homes may be fierce.

A “Housing Start” is a privately-owned home on which construction has started. It’s an important gauge of housing health because it tracks new housing stock nationwide.

In December 2009, starts fell by nearly 7 percent.

The news is mildly disappointing but not too bad. The likely cause for the Housing Starts drop is December’s rough weather conditions. It’s tough to break ground when Mother Nature won’t coordinate and last month was especially hazardous in a lot of parts of the country.

More cheery, however, is that for the second straight month, Housing Permits exploded. 

A housing permit is an certification from local government that authorizes construction. After posting a 7 percent gain in November, permits rose by another 8 percent in December.

It’s a signal that housing is, indeed, in recovery — despite the falling number of actual starts. More permits mean that builders plan to bring more homes on the market for what’s expected to be a very busy spring home-shopping season.

According to the Census Bureau, 82% of homes start construction within 60 days of permit-issuance.  Therefore, Housing Starts should start rising soon anyway.

For home buyers, the news couldn’t be better. 

With more homes coming online, competition among home sellers should increase, and that will suppress the rise in home prices in Cincinnati and nationwide. 

It’s basic economics.  When home supplies grow faster than home demand, prices fall.