Tuesday, October 19, 2010

Housing Starts: How to Read the Numbers

The Lehmann Letter (SM)

Today's Census Bureau announcement that housing starts grew slightly in September was good news:


But it also illustrated the importance of putting data in historical perspective.

Chart 5.7 Housing Starts

Click on image to enlarge)

Recessions shaded

The chart shows that housing starts have fluctuated around 600,000 at a seasonally-adjusted annual rate for over year. Today's report of 610,000 starts falls within that range. But the most important observation is housing starts' tumble from their high of over 2 million and their continued languishing in the trough.

These readings demonstrate the importance of historical perspective. Don't let the latest numbers overwhelm your judgment. There is always noise (random fluctuations) in the data. Beware of percentage changes. Always inquire: What is the basis for the percentage comparison? And, as the chart amply illustrates, a picture is often worth a thousand words.

(The chart was taken from http://www.beyourowneconomist.com. [Click on Seminars and then Charts.] Go there for additional charts on the economy and a list of economic indicators.)

© 2010 Michael B. Lehmann

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