Just a quick update here:
The Census Bureau and HUD released their monthly Residential Construction Report today.
Housing starts were at a seasonally adjusted annual rate of 519,000 in October, which is an 11.7 percent drop from September’s pace of 588,000 housing starts. This is about 10 percent above the all-time low, which occurred in April 2009. The expectation was that we would see a pace of about 590,000 housing starts, so this is a fairly disappointing report from that regard.
This is a weak report, although a lot of the decline is due to volatile multifamily starts, which fell by 44 percent in October. The main positive that I can see in this report is this: we don’t really need more homes (at least not in most parts of the country). There is about 10.7 months worth of housing supply on the market right now (as compared to 6 months in a normal market). There are also millions of homes in shadow inventory that have yet to come to market. In fact, the main reason that housing prices are declining (and will continue to decline for much of the next year) is that the demand for houses simply does not come anywhere near matching the supply of houses.
Until we clear the excess inventory of homes, we will not see a real recovery in the housing market. So in some ways, the lack of building is good (although it is most certainly bad for the beleaguered construction sector, which has been pummeled during the recession).
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