A Florida TaxWatch Economic Report
New home construction in Florida indicates growing economy
Housing starts lead the state's economy.
Over the last year, there have been an average of more than 4,600 housing starts monthly in our state. Privately-owned housing starts in Florida have grown, and are now more than double the rate of the recent low point in March 2009, when only 1,806 private single housing units were started in the entire state of Florida.
Florida’s current housing start numbers are still below historical numbers, but the trend is positive and it has substantial positive implications for the Florida economy.
Housing Starts: A Leading indicator
Housing starts are an indicator of the health of the economy as they show builders’ commitments to new construction activity and increases in housing starts indicate rising consumer demand. They also lead the national and the state economies which is why this statistic is often used in the construction of leading indices for state and national economies. For each of their State Leading Economic Index series, the Philadelphia Federal Reserve uses state-level housing permits for 1 to 4 units as one key indicator, along with other economic data such as interest rate spreads, initial unemployment claims, and average hours worked in manufacturing as well as other data.
In Florida’s case, seasonally-adjusted housing starts began to drop steeply in April 2006, a full year before the Florida recession started, in April 2007. In a similar manner, Florida housing starts bottomed out in March 2009, while the Florida economy stayed in recession until January 20101. Since the recovery of homebuilding from the lows in early 2009, housing starts have remained lower than historical levels, but they have shown steady increases and an acceleration in growth rates since early 2012.
1 Florida TaxWatch. Florida’s Business Cycle. June 2011.