Definition: A new home start is when ground is broken to build a new house. It's an economic indicator that measures the health of the housing market.

It generally happens about two months after the home is contracted for sale by the buyer and the permit is granted. It occurs around six months before closing. For this reason, it is a good predictive indicator of where the housing market supply will be in six months to a year.

It's not as early an indicator as new home permits, or new home sales, but it's more accurate. For example, builders can go bankrupt and never build the permitted units. They can change the number of units built in a multi-family. In fact, 22.5% of multi-family permits aren't built, or are changed to single-family units. Finally, developers often receive permits for a large portion of a complex that could take months and month to build. 

The new home start only occurs when the builder is confident enough to break ground. In addition, some areas (about 2.5% of the total) don't require permits before the builder starts. Here's more from the Census Bureau.

Statistics on new home starts are easily accessible, as they are measured by the U.S. Census Bureau. The report is released every month. Starts are broken down into national plus four geographic regions, and whether the building is single-family or multi-family apartment buildings. Here's the latest building starts statistics.  

New home starts tell you how confident builders are about construction.

However, keep in mind that the higher this number, the greater the supply of housing. New homes are generally more attractive to buyers than resales. Therefore, if too many new homes are added, it can actually depress the price of resales. This hurts individual homeowners.

Therefore, look at new home statistics, whether permits, starts or sales, in conjunction with resale volume and prices. See the latest home sales and prices from the National Association of Realtors.

Also Known As: Housing starts