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 Illinois , 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 Chicago 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 Chicago 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.

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)

A housing start does not indicate that the housing market has fully turned around, but it can reflect builder confidence and their forecasts moving forward.

To keep this in context, we have had an incremental improvement in starts, but we are still down 75% as compared to five years ago during the peak of the housing construction boom.   Still, 19,000 additional homes means 19,000 homes with construction crews working on them and that’s an incremental step in the economy.

Home builder confidence is at a 5-month high and foot traffic is rising as home buyers take advantage of today’s historically low interest rates.   These starts seem to reflect home builder confidence about market conditions six months from now.

A “Housing Start” is defined as a home on which construction has started.  Put into numbers, the 4% increase represents about 18,000 additional starts in August versus July.

If you only read the headlines, the data appears pretty solid.  There is a problem with that:  The margin of error for the survey regularly exceeds the results of the survey.  Essentially, single-family housing starts could be flat or up by 10%, the survey simply isn’t accurate enough.

That’s not a problem, it doesn’t make the data “wrong,” it simply makes it less relevant.   In our news-now world, every headline is taken as an absolute and that simply isn’t how the government has run these surveys for years.  Nearly every survey has revisions later and they’re almost expected.  If you only look at the monthly headlines and not the rolling average, you get headlines like these:

• 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)

If you want to get a real pulse on the real estate market, real estate remains a local phenomenon.  It is not a national figure unless you’re trying to deal with your stock portfolio and you’re evaluation national home builders.  In Chicago, our housing market isn’t influenced by those big builders as much as it is by the differences between neighborhoods.   For data like that, no one has better access that your real estate agent.

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 Chicago 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.

Perhaps the bigger news is that we finally moved higher than the 500k level that started last June.

Normally, this would have been great news, pushing stocks higher and bonds lower.   The issue is one of statistics.  The survey has a margin of error that is higher than 10%.  That all but negates the 10% gain.  The logical spot to check is Building Permits.  This is the bad part.

April’s permits show a drop of 11%.  The margin of error is less than 2%.  This isn’t good news and is a sign of low housing market confidence.

Housing is always a game of supply and demand.  If these numbers hold true, housing starts in June and July should ease as the April loss of building permits cycles through.   Odd as it sounds, if builder confidence was higher and we saw the corresponding surge in both the Housing Starts and Building Permits reports would almost bad for home prices.  An increase in supply would put downward pressure on prices.

The best times to buy a home may be soon.  As the summer months come to close, we may find that buyers vastly outweigh sellers.

Housing Starts are climbing.  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.

“Housing Starts” are privately-owned homes on which construction has started.  It is a very important measurement because it forecasts the supply of new homes in the future.

Starts dropped by 7% last month.  Before we get too concerned, last month’s slow figure was driven by the extreme cold that gripped the country.

Are home values trending higher?  Perhaps.  Housing starts are controlled by the foreman and Mother Nature.  Housing permits are controlled by the developer and the bank.

Housing permits are on the rise, posting another 8 percent jump.   Housing permits are typically a pretty good sign that the people with the most money to lose are seeing a good value in taking the risk.