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The Housing Starts Numbers In Context

By
Services for Real Estate Pros with TheHousingGuru.com

With the Census Bureau’s release of the April housing data, perhaps we should put the housing starts numbers in context. Most of my readers are now aware that I’m neither a housing nor recovery “cheerleader,” that is, I don’t believe that the economy is close to rebounding to the levels of three years ago. And I’m sometimes criticized for my “negativity” and encouraged to put a more positive “spin” on my projections. My intent, however, is to present the most accurate picture possible to help consumers and those in the real estate industry make prudent choices.

 

Graph of housing starts

Certainly there is some positive news in an increase in housing starts, but we only have to compare where we are now with the numbers of three years ago to see that we’re far from a housing recovery. And while single family housing starts for April (an annual rate of 593,000 units) were almost 11% above the rate for March, building permits for April (606,000) declined by about 11% below the March annual rate of 685,000.

 

What this tells us is that builders anticipate a drop in sales with the expiring Housing Tax Credit, and will therefore be starting fewer homes. Ultimately, that’s positive news and will help to remove some of the excess inventory. However, I expect new home sales to continue at below average numbers until the foreclosure and short sale inventory is reduced and the economy begins to add significant numbers of new jobs. A quick review of the graph helps put the housing starts numbers in context.

 

Thanks to Calculated Risk for the graph.

 

The Housing Guru: The expert source for all your housing questions

 

Patsy Overton
Patsy Overton Interiors, Atlanta, Georgia - Duluth, GA

John, this is definitely not the "warm and fuzzy" news we hear from the networks, but when I ride around town and still see multiple foreclosure properties on every block as I did yesterday, I know this is accurate.  I told my husband yesterday that if we don't buy now, we are just plain idiots!

May 18, 2010 07:34 AM
John Mulkey
TheHousingGuru.com - Waleska, GA
Housing Guru

Patsy - I refrain from the "warm and fuzzy" reports in favor of the facts.  I want to know the reality of the economy and share the news when I see it.

May 18, 2010 07:43 AM
Jay Markanich
Jay Markanich Real Estate Inspections, LLC - Bristow, VA
Home Inspector - servicing all Northern Virginia

I think your assessment is correct John.  A lot of flotsam (foreclosures and short sales) needs to be cleaned out and wages and personal income needsto increase (i.e. employment) until things really rebound.  I think the builders, who employ economists all, are aware of that.

May 18, 2010 07:55 AM
John Mulkey
TheHousingGuru.com - Waleska, GA
Housing Guru

Jay - As a former builder I know how I view the market.  When I decided to stop building almost 3 years ago I told my agent not to expect anything else from me.  "By the time the market returns," I said, "I'll be too old to build more homes."  My outlook hasn't changed.

May 18, 2010 08:05 AM
Esko Kiuru
Bethesda, MD

John,

With so much existing home inventory still out there sometimes you wonder why builders are starting any new homes at all.

May 18, 2010 02:30 PM
John Mulkey
TheHousingGuru.com - Waleska, GA
Housing Guru

Esko - I think the recent boost was merely a response to the tax credit. That's why builders are cutting back on permits.

May 18, 2010 04:04 PM
Trey Thurmond
BCR Realtors - College Station, TX
College Station , Texas Homes

John

Thanks for telling it like it is. The picture you paint is very accurate nationally. Our area has seen some increase in permits, but I attribute that to other local phenomenon.

May 18, 2010 04:32 PM
John Mulkey
TheHousingGuru.com - Waleska, GA
Housing Guru

Trey - While I'm not predicting a housing collapse, I think the recovery will be slow and anemic.

May 19, 2010 12:30 AM
Ted Baker
Carmody and Associates LLC - Winter Haven, FL
MidFloridaMediation.com

applause

 

 

John - I subscribe to your blog because I enjoy your writing style and appreciate your research and common sense - and I can't get any of that in the mainstream media.  Keep up the good work. 

 

May 19, 2010 01:04 AM
Sue Neff
Tennessee Real Properties - Jamestown, TN
Principal Broker, Jamestown, TN

Thanks for the graph.  I am a visual person and this portrayal of information is just what I look for. I've sent this graph to my sellers and will keep it on hand for my buyers.  Now IS the time to buy!

 

May 19, 2010 01:17 AM
John Mulkey
TheHousingGuru.com - Waleska, GA
Housing Guru

Ted - Thanks for the comments and support.

Sue - There are some great bargains, and with the guidance of a real estate professional, buyers can find the best ones.

May 19, 2010 01:55 AM
Michael J. Perry
KW Elite - Lancaster, PA
Lancaster, PA Relo Specialist

We have a number of subdivisions that were planned for McMansions price point -wise and are basically sitting !

May 19, 2010 01:58 AM
John Mulkey
TheHousingGuru.com - Waleska, GA
Housing Guru

Michael - We have several in my area also--we call them "green pipe farms."

May 19, 2010 02:24 AM
Janice Roosevelt
Keller Williams Brandywine Valley - West Chester, PA
OICP ABR, ePRO,Ecobroker

John: I don't see you as negative- the graphs are excellent. So is your text. As the new pop culture phrase goes "it is what it is"

May 19, 2010 11:26 AM
John Mulkey
TheHousingGuru.com - Waleska, GA
Housing Guru

Janice - I'm regularly criticized for presenting the "facts," but I do believe it important that we all have the most accurate information possible to help navigate through a sometimes bumpy economy.

May 19, 2010 11:29 AM
Terry Chenier
Homelife Glenayre Realty - Mission, BC

John,

I don't think we are anywhere near out of the woods. The European crisis is the other shoe and it will affect everyone.

May 21, 2010 04:40 AM
Terry Chenier
Homelife Glenayre Realty - Mission, BC

John,

Just adding to that; lots of people don't like to hear the truth and prefer to have their collective heads buried in the sand.

May 21, 2010 04:42 AM
John Mulkey
TheHousingGuru.com - Waleska, GA
Housing Guru

Terry - Europe, China, U.S. debt, and more--the noise of falling shoes is thunderous.

May 21, 2010 04:44 AM
Matthew Naumann
Exit Realty Charleston Group - Goose Creek, SC
Goose Creek, SC Real Estate Agent

John,

Great Post.  This information is very telling for what is happening in the market.

Thanks for sharing,

Matt Naumann

May 25, 2010 02:20 AM
John Mulkey
TheHousingGuru.com - Waleska, GA
Housing Guru

Matt - And it's showing little signs of significant improvement.

May 25, 2010 04:27 AM