Construction indicator constitutes significant group that are 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 after World War II. These indicators are classified into three major categories:
1. housing starts and permits
2. new and existing one-family home sales; and
3. 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. Besides, in spite of the 2000 – 2001 recession the cost of houses, for example in California, was practically not 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.