Once again, the headlines may be misleading you. It's a good thing that Housing Starts dropped last month -- despite what the papers say.
A "housing start" is a new residence on which construction has started. Yesterday, the government released September 2007's Housing Starts data for the country.
- There was a 10.2% drop in Housing Starts versus August 2007
- There was a 30.8% drop in Housing Starts versus September 2006
The headlines are trying to tell us that this is bad news for the U.S. economy. On the contrary -- this is excellent news!
Determining a home's value is mostly based on Supply and Demand for that particular home. In its own neighborhood, an over-supply of like homes can be a significant drag on the value of all homes in the neighborhood This is a concept many people understand.
So, when builders stop adding new supply to the housing market -- on a neighborhood-by-neighborhood basis -- the existing demand for homes can "catch up" with the existing supply of homes. This can rebalance the Supply and Demand equation and place upward pressure on home values.
Many homeowners (and future homeowners) can agree that rising home values is a good thing. Rising home values creates wealth and opportunity.
So, just because the headlines read that the news is bad, that doesn't mean that it really is bad. Housing Starts are down and that is a good thing.
(Image courtesy: The Wall Street Journal Online)
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I fully agree with you, all day potential home buyers tell me that they are scared to purchase because the home values are dropping. I wish that they would actually listen to what they are saying! 2 years ago, my clients couldn't get into a house unless they paid thousands of dollars over the list price, gave up home inspections, and forget about any seller assistance.
With all of the news buyers are somehow convinced that when new construction starts are low, and that the banks are in trouble its and inventory high they shouldn't buy.
I can't tell you how many builders contact me on a weekly basis offering me all sorts of DEALS to sell their homes. The home buyer is going to miss the boat.