Not if you believe everything you read in the press. These writers present only what appears on the surface. Yes, Housing Starts plunged last month. Does this mean the Housing Market is in the toilet?
The government has just released September 2007's Housing Starts data for the country. A "Housing Start" is a new home on which construction has commenced.
= Versus August 2007, starts are down 10.2%
= Versus September 2006, starts are down 30.8%
Headlines are saying that this is bad news for the U.S. economy, proof that real estate is in a tailspin. That the ”nightmare” is ongoing. As usual, the press hasn’t done their homework. If Housing Starts are down, it means that the housing supply will also be down shortly. Add to this scenario, builders who are no longer adding new supply to the housing market, the existing demand for homes are allowed catch up. At this point we see a rebalancing of the Supply and Demand, as home values rise.
The result
= Todays buyers will buy with confidence, realizing the investment value of their purchase.
= As values rise, mortgage lending risks decline and helps more people get approved for more types of mortgages.
= More buyers will be able to get approved for more types of mortgages.
= Rising home values create wealth in the form of home equity. Home prices aren't being supported by the existing demand, which tells us that it's time to cut the supply, and that's what the builders are doing.
So, this is one approach for the media to present a more realistic explanation of what’s current in real estate.
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