Housing Starts Rise In April, Exerting Downward Pressure On Home Prices

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Real Estate Agent with CONLON/Christie's International Real Estate

Housing Starts Rise In April, Exerting Downward Pressure On Home Prices

Housing  starts May 2008 - April 2010

Single-family Housing Starts rose by 55,000 last month, suggesting ample housing stock from which can choose this summer.

The report is a slightly larger read than what economists had expected.

Furthermore, for the first time since June 2009, Housing Starts appears to have broken away from its half-million unit plateau. 593,000 new homes were started in April.

Ordinarily, both Wall Street and Main Street would celebrate a strong housing sector report like this, but the Department of Commerce's press release also held two cautionary notes.

The first point of caution is a mathematical one.  Although single-family starts increased by 10.2 percent, the survey had a Margin of Error of 10.7 percent. This means that Housing Starts may have fallen by 0.5 percent and the report is statistically worthless.

The second point of caution is tied to Building Permits, a complementary data point in the same Department of Commerce report.  In April, Building Permits fell by almost 11 percent with a tiny Margin of Error of less than 2%.  This tells us that builders are pulling back -- a sign of low housing market confidence

According to the Census Bureau, 82% of homes start construction within 60 days of permit-issuance. Housing Starts, therefore, should ease though June and July.

Home prices are based on housing's supply and demand.  For the next few months, supply should elevate, helping prices remain suppressed, after which, supply should dwindle. 

The best time to buy a home, therefore, may be now.  As the summer months come to close, we may find that buyers vastly outweigh sellers.

Posted by Michael LaFido on May 19, 2010 | Tags: Housing Starts

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Rainmaker
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John Thomas
E3 Green HOMES - Boulder, CO
EcoBroker, MSEE, MBA

Interesting data. My only problem with it is like most housing data it throws in almost everything including the kitchen sink. To gather anything meaningful beyond wishful thinking data needs to be segmented as much as possible. Region, city, neighborhood, and price point would provide good information to support transaction decisions. But without some degree of localized geography and price point the usefulness of the information is simply too diluted. It would great if we could get this kind of information with more granularity.

May 19, 2010 06:00 AM #1
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Rainer
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Michael LaFido

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