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Why home construction data matters


David Charron, president and CEO of Rockville-based multiple-listing service MRIS, writes an occasional column about the Washington-area real estate market.

Every month we eagerly anticipate the report on new home starts. Home construction is one of the most closely watched aspects of the real estate industry.

The report is a strong gauge of the health of the housing market. It has a significant impact on the larger economy and helps strengthen communities.

New construction data is valuable for its volume and its accuracy. Since permits are required before any construction can start, and permit information is publicly available, economists and other industry analysts use this information to draw conclusions about market trends. These conclusions are formed from accurate information and not conjecture based on asking prices and sales totals.

[For more analysis of the local real estate market, check out the Real Estate section’s Spring Home Guide on March 28 and online sites Where We Live and]

Permits are also a low-cost way to obtain high-quality data. They don’t require a team of interviewers trying to glean information from respondents all over the country. Plus, they are one of the few sources of verifiable information that offer both real-time and forward-looking data. We can understand the state of today’s market as well as how things are going to look a few months from now when the homes have been completed and enter the inventory pipeline.

New housing data provides valuable information beyond just how many new units are constructed. It includes design data like square footage, number of floors, types of materials and the time it takes to complete a house. Developers, who are deeply in tune with their local markets, make these design decisions based on solid research about what the local market will bear.

Urban planners, real estate analysts and material suppliers can use this data to measure the mood of local buyers and sellers. Knowing the direction a market is headed can influence their decision making and help better serve prospective buyers and sellers.

While this data helps us follow the pulse of changing market conditions, new construction’s biggest impact is to our economy and the number of jobs it creates. The employment opportunities touch almost every income level, but especially those in the middle and lower wage groups. From the workers who build the house, landscapers who maintain the yard, manufacturers who produce building materials, retail workers who sell everything from paintbrushes to screwdrivers, permit inspectors and real estate agents who facilitate the final sale, there are of dozens of people employed for every new house constructed.

In an urban setting such as the Washington region, most of the larger residential construction projects are required to include a community improvement component. For cities that don’t have budget to upgrade streetscapes and community amenities, these private initiatives are efficient ways to improve a city block or entire neighborhoods.

Some of the projects recently completed or in the works for D.C. include more Capital Bikeshare stations, seed money for a U Street Business Improvement District, grants to improve Brookland storefronts and funding for arts-related spaces across the city.

The ripple effect of these projects can be felt for decades. They bring vibrancy to a neighborhood and raise the property valuation of the homes that are already there, without requiring the existing owners to spend their own money.

Newly constructed homes provide more than just a place for a family to live. They provide an accurate way to measure local and national economic trends, contribute to our country’s economy and are an efficient way for municipalities to undergo improvements at little cost to the taxpayers.

A healthy housing market has a balanced mix of new and existing homes along the entire price spectrum. We need all types of homes in this region.

But paying attention to the new ones helps ensure we keep a strong finger on the pulse of the market.

Previously from David Charron:

What home buyers can expect this spring in three hot D.C. neighborhoods

Five real estate trends to watch in 2015

Where condo sales are hottest in D.C.

How first-time homebuyers can beat the odds

The three hottest D.C. neighborhoods for condos and townhouses

How buyers can stay competitive in a low-supply, high-demand market

Higher interest rates will slow housing market growth in 2014

What buyers and sellers need to know about the end-of-year market

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