By: Dennis Norman
Today the U.S. Department of Commerce reported new home starts for February were up over 22% from January although still over 47% down from a year ago.
This increase was unexpected and judging by the many news stories and blog posts I have seen today is apparently being viewed as good news. I don’t want to be a naysayer nor be pessimistic, but I don’t know that it is time to throw the party yet.
Before I go any further I do have to say that I am elated that the press is saying positive things about the industry and I am happy for those people out there working in the industry that may be getting a check this week as a result of the new homes being built. However, I felt in the past the media made the real estate market out to be much worse than it really was which ultimately almost became a self-fulfilling prophecy. Well, even in the sensationalism is in favor of an industry I care an awful lot about, I still want the story to be accurate.
So why am I not celebrating just yet? For starters part of what help fuel the housing crisis we are in was too much inventory….too many homes being built. So I am not so excited more are being built…what would excite me is new home sales increasing and months supply decreasing…neither of which has happened yet.
Last month I wrote a post about the January new home sales report which showed sales down and the supply of new homes over 13 months. The report for January indicated new home sales at an annual rate of 309,000. The report today shows new home starts at an annual rate of 357,000. Translation: unless the new home sales numbers for February showed a marked increase, the new home starts figure today shows we are on track to build 15% more new homes then will sell….this is not the direction I think we want to go to get the market back in balance.
On March 25th the Commerce Department will issue new home sales numbers for February 2009. If we are lucky they will show an increase from January and an annual rate of new home sales similar to the rate of starts.
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