Housing Starts Rise In November, But With A High Margin Of Error

Posted: December 22, 2010 in Housing Starts
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Housing Starts Dec 2008-October 2010The 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 Arizona , 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 Phoenix 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.

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