Construction indicators constitute a significant group that
is included in the calculation of the GDP of the United States. Moreover,
housing has traditionally been the engine that pulled the U.S. economy out of
recessions as it did after World War II. These indicators are classified into
three major categories:
housing starts and permits
new and existing one-family home sales; and
construction spending.
Construction indicators are cyclical and very sensitive to
the level of interest rates (and consequently mortgage rates) and the level of
disposable income. Low interest rates alone may not be able to generate a high
demand for housing, though. As the situation in the early 1990s demonstrated,
despite historically low mortgage rates in the United States, housing increased
only marginally, as a result of the lack of job security in a weak economy. For
example, in spite of the 2000 – 2001 recession, the cost of houses in
California hardly decreased. Housing starts between one and a half and two
million units reflect a strong economy, whereas a figure of approximately one
million units suggests that the economy is in recession.
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