U.S. Housing Starts: August 2013 Preview

Includes: ITB, IYR, REZ, XHB
by: James Picerno

Housing starts are expected to total 889,000 in tomorrow's update for August, based on The Capital Spectator's average econometric forecast (seasonally adjusted annual rate). The projection represents a slight decline vs. the previously reported 896,000 total for July. By contrast, several consensus forecasts drawn from surveys of economists anticipate a moderate rise in August housing starts vs. the previous month.

Here's a closer look at the numbers, followed by brief definitions of the methodologies behind our projections:

VAR-3: A vector autoregression model that analyzes three economic series to project housing starts: new home sales, newly issued permits for residential construction, and the monthly supply of homes for sale. VAR analyzes the interdependent relationships of these series with housing starts through history. The forecasts are run in R using the "vars" package.

ARIMA: An autoregressive integrated moving average model that analyzes the historical record of housing starts in R via the "forecast"package.

ES: An exponential smoothing model that analyzes the historical record of housing starts in R via the "forecast" package.

R-1: A linear regression model that analyzes the NAHB Housing Market Index in context with housing starts. The historical relationship between the data sets is applied to the more recently updated NAHB Housing Market Index to project housing starts. The computations are run in R.