May Housing Starts up 17.2% - Good or Bad?

Mortgage and Lending with Pinnacle Mortgage NMLS# 147581

The Commerce Department reported Tuesday that housing starts increased 17.2% to a seasonally adjusted 532,000 annual rate compared to April.  The financial markets responded favorably interpreting this as a sign that the housing market is bottoming.  But is it?

Housing starts are a measure of new construction starts, not sales.  We currently have on average, a 10 month supply of unsold homes and have been at that level for almost 2 years.  Housing prices will not stabilize and the market will not recover until we shrink that inventory level down to a more normal 4 to 5 months. 

With an untold number of foreclosed homes still remaining to be brought to market do we need to add new construction to the mix?  I think not.  We already have more homes than we have qualified buyers for.  Let's get the existing inventory reduced before we starting building again.

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