Housing starts are expected to total 1.023 million in tomorrow’s update for December, based on The Capital Spectator’s median econometric forecast (seasonally adjusted annual rate). The projection represents a modest decline vs. the previously reported 1.091 million for November. Meanwhile, the Capital Spectator’s median estimate for December is above a trio of consensus estimates based on recent surveys of economists.
Here’s a closer look at the numbers, followed by brief definitions of the methodologies behind The Capital Spectator’s projections:
VAR-3: A vector autoregression model that analyzes three economic series to project housing starts: new home sales, newly issued permits for residential construction, and the monthly supply of homes for sale. VAR analyzes the interdependent relationships of these series with housing starts through history. The forecasts are run in R using the “vars” package.
R-1: A linear regression model that analyzes the NAHB Housing Market Index in context with housing starts. The historical relationship between the data sets is applied to the more recently updated NAHB Housing Market Index to project housing starts. The computations are run in R.
TRI: A model that’s based on combining forecasts with a technique known as triangular distributions. The forecast combinations include the following projections: Econoday.com’s consensus forecast data and the four predictions generated by the models noted above, i.e., VAR-3, ARIMA, ES, and R-1. The forecasts are run in R with the “triangle” package. For more information about TRI, see this post.