Housing Market Data Explained: Starts, Sales and Home Prices

Housing matters to the economy for a simple reason: buying a home is usually the largest purchase a household makes, and most of it is financed. When borrowing costs move, housing tends to react quickly. That makes housing data a useful read on how interest rates are working through the economy, and why economists and investors follow it closely.

The trouble is that the data comes in many pieces, published by different agencies on different schedules. This guide sorts them into three groups: reports about supply (what is being built), sales (what is being bought) and prices (what homes cost).

Supply: permits and housing starts

Building permits count the permits issued for new residential construction. They come first in the sequence, because a builder needs a permit before breaking ground.

Housing starts count the homes on which construction has begun. Housing completions count those that are finished. The US Census Bureau publishes these figures, jointly with the Department of Housing and Urban Development, and splits them between single-family homes and buildings with multiple units.

Why they matter:

• Permits are a forward indicator, since they signal what builders expect to start.
• Single-family and multi-family numbers behave differently. Multi-family starts can be lumpy because a single large project can swing a monthly figure.
• Both are reported at a seasonally adjusted annual rate, meaning the monthly pace is adjusted for seasonal patterns and expressed as if it continued for a year. The headline number is therefore a pace, not a count of homes started that month.

A caution: starts are volatile and often revised. The trend over several months is more informative than any single reading.

Sales: existing, new and pending

Existing home sales measure closed sales of previously owned homes. They are reported by the National Association of Realtors and make up the large majority of the market. Because a sale is counted when it closes, the figure reflects contracts signed weeks earlier.

New home sales count sales of newly built homes, based on contracts signed. The Census Bureau and HUD publish it. It is a smaller part of the market but is closely tied to builders' activity, and it is among the more heavily revised series.

Pending home sales track signed contracts on existing homes that have not yet closed. The National Association of Realtors publishes an index of these. Since contracts come before closings, it is often treated as a lead indicator for future existing home sales.

Prices: median, repeat-sales and index measures

Prices are trickier than sales volumes because homes differ so much. There are several approaches.

Median sale price. The middle price of homes sold in the period. It is easy to understand, but it can move simply because the mix of homes sold changed. If more expensive homes sell in a given month, the median can rise even if no individual home gained value.

Repeat-sales indexes. These track the price changes of the same properties across multiple sales, which controls for the mix problem. The S&P Case-Shiller indexes are the best-known example, and they cover national and metro-area home prices. They are published with a lag and use a moving average across several months, so they react to changes slowly.

Federal Housing Finance Agency (FHFA) House Price Index. This index is also built on repeat transactions, using mortgages backed by Fannie Mae and Freddie Mac. It offers a different sample from Case-Shiller.

Different indexes can show somewhat different results because they use different samples and methods. That is expected, and it is why comparing the direction over time matters more than comparing levels.

Inventory, mortgage rates and affordability

Several related measures give context to the sales and price data.

• Inventory and months' supply. The number of homes for sale and how long it would take to sell them at the current pace. A lower months' supply generally favors sellers, and a higher one favors buyers.
• Mortgage rates. Freddie Mac publishes a weekly survey of average mortgage rates, and many other lenders and data firms publish their own. Rates influence monthly payments and so affordability.
• Affordability measures. Trade groups and others publish indexes that compare income to typical housing costs. Definitions vary, so check what a particular measure includes.

Mortgage rates are not set by the Federal Reserve directly. They follow longer-term interest rates and credit conditions, which respond to expectations about the Fed's policy. For the bigger picture, see What the Federal Reserve Actually Does: Rates, the FOMC and Your Money.

How housing connects to the rest of the economy

Housing feeds into the broader economy in several ways:

1. Growth. Residential construction and the spending around it, such as furniture and renovation, feed into gross domestic product. See GDP Explained: How the US Economy Is Measured and Why Markets Care.
2. Inflation. Shelter is a large component of consumer price measures, though rents and home prices enter the data in different ways and with delays.
3. Household wealth and spending. Home values are a large part of many households' net worth, which can affect confidence and spending.
4. Jobs. Construction and real estate services employ many workers.

How to read a housing release

• Look at the trend, not the month. Use a three-month average or compare with the same month last year, which sidesteps most seasonality issues.
• Read the margin of error. Many series are survey-based, and small changes may fall within the noise.
• Check for revisions. The previous month's number is often revised in the new release.
• Separate volume from price. Fewer sales do not necessarily mean falling prices, and vice versa, especially when owners choose not to sell.
• Consider local differences. National figures hide wide variation across metro areas and price tiers.
• Remember the lags. Closed sales reflect past decisions, and price indexes are slower still.

What this data cannot tell you

Housing data describes the market, not the right decision for any one household or portfolio. It does not predict future prices, and a strong or weak month does not guarantee what follows. Investors often use housing reports as one input alongside employment, inflation and spending data, as covered in Consumer Spending, Retail Sales and Sentiment Explained.

Official sources are free to read. The Census Bureau, HUD, the National Association of Realtors, the Federal Housing Finance Agency and Freddie Mac each publish their methodology and release calendars on their own websites, which is the best place to check how a number was built before reacting to a headline.