Housing Starts Near Bottom

This morning the U.S. Department of Commerce reported that housing starts in the United States were at their lowest level since April 2009.  Data show that in February starts fell 22.5% to an annualized rate of 479,000.  “Housing starts” mean a new home that has begun to be constructed.

Analysis: I have talked at length on the blog about the very poor supply and demand situation facing the housing market.  For housing starts to have hit their lowest level in almost two years is a positive sign.  How’s that?

In order for the supply and demand of homes to finally reach equilibrium, for prices to finally stabilize in the housing market, there has to be lower supply of homes (and increased demand).  That housing starts are so low means that the supply of homes relative to demand is slowing.  Significantly, this means that prices should begin stabilizing soon.

It will be important to compare the housing starts data to overall home prices and home selling transactions in order to really tell if the housing market has reached a true bottom.  Once a bottom in housing has happened, the industry that was at the heart of the Great Recession and its wrathful destruction of gross domestic product (GDP), will have started to recover; and that will for me mark the actual end of the Great Recession.

Importance grade: 6; while encouraging, it will take several more months worth of data to know whether or not the housing market has truly, definitively, hit bottom.  Meaning that it can only grow from that point forward.

Jason