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Housing Starts in the U.S. Information

The latest Housing Starts and Building Report has economists convinced that the U.S. housing crunch has not reached its end.
"U.S. housing starts have left no doubt that the housing crunch is still in full swing," according to Dimitry Fleming with ING Wholesale Banking. "Home builders have now cut production 60% since the peak early 2006, but despite these drastic measures the overhang - as measured by the months of available supply - is still enormous and is even approaching the highs of the early '80s crash."
There is a reason why economists refer to their discipline as "dismal science." What is overlooked by so many doomsayers when comparing today with the '80s is the cost of money (interest rates).
Then ('80s) the supply of money was scarce. There was a demand but high interest rates kept financing out of the reach of willing homebuyers.
Then ('80s) - Not only was credit scarce but if you were lucky enough to find a willing lender the average monthly rate for a 30-yr fixed Freddie Mac mortgage approached 16% during the first three years in the '80s. - Inventory of unsold new homes was bloated because many builders and construction lenders were committed to total build-outs of housing projects, which exacerbated the situation. - Oil and gas supplies were also in short supply, causing not only high prices, relatively speaking, but the shortage resulted in rationing at the pump. - The U.S. economy and financial markets were strained. - In spite of the negatives the economy did right itself and by the end of the '80s 30-yr mortgage rates fell below 10%, with rates bottoming out at 5.45% in 03/04. - Commercial real estate also took a severe bath through the '80s. - Some single-family markets fell victim to over-speculation and paid the costs of a market correction. - Recovery was slowed by the speed at which mortgage fell, slowly. - The S&L fiascos and the Resolution Trust Corporation resulted in a cleaner lending environment.
Now ('08) - Again, the U.S. economy and financial markets are strained. - Oil and gas supplies are expensive. But there is considerable debate if shortage, international politics, fear or speculation is the cause(s). We are not yet subject to rationing. - Some single-family markets have fallen victim to over-speculation and are paying the costs of price corrections. - The current housing turmoil has been caused by loose lending practices, not by lack of lending. - Today, more households are being created and the market of potential buyers is growing. Recovery has the benefits of low mortgage rates and the attention of Washington to create alternative financing programs for those in financial distress with their current financing. - The mortgage and secondary market will be scrubbed clean by the market's own purging and closer oversight will eventually strengthen the housing market. - The coming recovery will be faster and more solid than past dips as homebuyers and the financial markets recover and regain confidence.
Wasn't it Will Rogers who said he liked real estate because they don't make any more of it?

Posted by Joseph & Cheryl Melendez on 06/24/2008 12:49 PM

Comments (3)

real estate, real estate market, realtors, buyer, buyers, lenders, loans, seller, sellers, mortgage

Post is included in group: The Art Of Marketing You

3 Comments on Housing Starts in the U.S. Information

I have to wonder whether the government is going to end up taking over the banking system like they did the savings and loans back in the 1980's.

06/24/2008 12:56 PM

by Bill Austin (East Valley Living)

You also need to look at the concentration of home on the southern coasts and some other cities. This issue is the backlog that was built for investors. I think some of these areas (like Las Vegas) are ripe for big future gains.

06/24/2008 12:59 PM

by Team DiMuria, Katy Texas Realtors (Prudential Gary Greene Realtors)

Joseph and Cheryl,

I focus on the good things during this market...I think many of us just are focused on bringing in more business... We are the ones marketing these properties...we all must be creative to help bring our country out of this mess even though it is not neccessarily all of the realtor's fault.

Thanks,

Tom Davis

World Class Delaware Realtor

06/24/2008 01:32 PM

by Delaware Homes For Sale:FREE Delaware Search: Delaware Real Estate: Tom Davis (Delaware Real Estate: Delaware Homes: Delaware, Dover , ERA)

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