One of the biggest drivers in a slow housing market is too much inventory. Tighter inventory forces buyers to make decisions and keeps pressure on pricing. Too much inventory and buyers are afraid of making the wrong decision and pricing becomes much harder to hold. Economic common sense, right.

Except in the  housing industry which it seemed was going to keep building like it was 2005. (Apologies to Prince (or whatever his name is today)) Now builders are finally slowing down their building to match the marketplace. Sure they will be losing potential money, but when their present inventory is not moving it is crazy to create more. And since most of their labor is contract the impact to these companies profitability will not be that bad. Sure sales will drop, but as my Dad told me, selling a 20 dollar steak for 15 dollars is not good business.

Maybe these builders will learn the lesson and not keep squandering their shareholders equity.

Builders in the U.S. began work in August on the fewest homes in 12 years and inflation cooled, economists said before government reports that come a day after the Federal Reserve reduced interest rates.
The decrease in housing starts to an annual rate of 1.35 million, the slowest since June 1995, followed a 1.381 million pace in July, according to the median forecast of 77 economists in a Bloomberg News survey. Prices paid by Americans were little changed in August, Labor Department figures may show.  via Bloomberg.com

Related posts:

1. Housing Starts Down 54.2 Percent For April, 2009
2. Washington Programs That Are Destroying The Real Estate Market
3. New Construction Seen At Bottom, Opportunities Arising For Builders