Tuesday, May 19, 2009

US Housing Starts Down - But is this Bad News?

Today, the US Department of Commerce reported that housing starts fell to record levels in April. Is this bad news? In an appreciating real estate environment, definitely. But, the US economy, real estate, lending, and even consumer spending are all contracting. Times are different now.

I am encouraged by these numbers. Why? Because there is a glut of housing inventory on the market now. This inventory needs to be consumed before new homes hit the market.

Though the media will largely report on the headline number (since they are all about getting attention through the headlines), and analyst remarks will fall on both sides, this remains: housing starts are lower, BUT DEMAND IS UP. Consumers are eating into this inventory. Inventory levels are declining in many markets - especially the overheated and subsequently over-depressed ones. Builders are also being more prudent when it comes to construction, which is healthy in the long-term. Don't you think? I'd be interested in hearing your thoughts.

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