Filed under: Money and Finance This day, Economic data, Housing, Financial Crisis
When you read the stories this day about home construction hitting its lowest level since 1959, you probably think it’s just more bad news — but it’s actually good news.
The only way we’re going to even get near the bottom of the housing price drop is for the backlog of available homes to be sold. We’ll only see prices begin to climb back up when demand is higher than the available supply. We’re still a long way off from that scenario, but if builders stop building, we’ll get there a lot faster.
Based on the new numbers released this day by the Commerce Department, the pace of new construction will put the U.S. on track to build the fewest new homes and apartments since the end of World War II. Commerce reported that construction of new homes and apartments dropped to 791,000 on an annual basis. Prior to today’s report the slowest pace since World War II was in January 1991. This was the fourth straight monthly drop and I doubt it’s the last one. There are still too many homes waiting to be sold.
The declines were led by a 31% drop in the Northeast and 13.7% drop in the Midwest. There were modest increases in the South (1.5%) and the West (7.5%). Given that the South and the West were the hardest hit at the beginning of the housing bubble burst, this could be good news that these hard hit areas are nearing their bottom.
Continue reading Home construction hits record low - could be good news
Home construction hits record low - could be good news originally appeared on BloggingStocks on Wed, 19 Nov 2008 13:45:00 EST. Please see our terms for use of feeds.
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