Tuesday, December 16, 2008

Good news---housing starts down 18.9%

Housing starts in November were down 18.9%, to an annual rate of 625,000 units. The number was lower than the estimate of all 71 economists surveyed. One of them was quoted on Bloomberg saying, "The horrifying thing is that we're likely to keep going down from here".

Lower housing starts mean fewer construction jobs and lower purchases of building materials and related products. The economy will continue to weaken. That's not good news of course. What if, however, housing starts were not declining. That would mean more new inventory into a market that is dead in half of the country and stalled in the other half. 625,000 new houses underway in an economically distressed country of 300 million people, many of whom obviously live together, intuitively seems like a number that can easily replace deteriorating properties. If prices are to stabilize and then to rebound supply needs to be restrained. Three cheers for lower housing starts. It must happen in order to stop the bleeding of wealth from middle class America's largest asset.


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