This big market news this morning is housing starts. They are down 6.2% and permit applications are down 8.9%. Rather than gloom and doom, this is actually good news. It is good because it is a sign of market capitulation - a bottom. How long we stay at the bottom is anyone's guess. I have always been of the opinion that rather than causing an economic downturn, the collapse in housing was a harbinger of hard times - but we were overdue.
Now, builders are not putting up houses without firm contracts. This will hopefully result in firmer pricing. It will also help the resale market - now those homes on the market will not have to compete with new construction. In another sign last week, it appeared that the percentage of existing home sales represented by foreclosures and REOs was up sharply and that owner occupants were taking their homes off the market. This is also good news. The faster foreclosures and REOs are reabsorbed, the better it will be for the overall market. It will also positively impact resale prices that have been under pressure for the last two years.
I don't want to make this all sound too rosy. It is still hard to keep the doors open. Settlement service providers like closing attorneys have fixed costs like rent, electricity, errors and ommissions insurance, data and computer services - the list goes on. My daily business overhead is $500.00 per day - whether I close a transaction or not. However, it does pay to try to synthesize all the information we get on the news and winnow out the hype. Bad news sells advertising - thoughtful analysis is a little dull.
The market will correct this imbalance. While things seem bad, it is nothing compared to 1929, or even 1987. Historical perspective is important.
Hang in there everyone!
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