Housing starts as an economic indicator are useful because they:

Correct Answer

C) Signal future supply and reflect builder confidence

Why this is correct: Housing starts measure the beginning of new residential construction. As the original explanation states, they are a leading indicator because they signal the future supply of homes (completions) months ahead. They also reflect builder confidence, as builders start projects based on anticipated demand. Why the other choices are wrong: Housing starts do not report the number of homes sold last month; that is sales data. They do not measure current absorption, which is the rate at which available properties are sold or leased. They do not indicate the average age of the existing housing stock, which is a demographic characteristic. Exam tip: Think of housing starts as a forecast of future inventory and a gauge of builder sentiment.