Single Family Housing Starts Finally Below Purchase Rate

Check out this chart from Calculated Risk comparing new housing starts, new home sales, and homes that are completed and ready for sale.

(click for full sized chart)

You will notice that for the past 2+ years we have had an extreme overbuilding issue in the housing market. Builders and developers had too many projects in the pipeline that ended up being built for a marketplace that could not absorb the inventory. The speculator had left the building and demand dropped like a stone.

But you will see in the past 2 quarters starts have dropped below sales and the inventory of completed homes is getting near home sales. This tells me that at least on new construction, the market has found it’s legs, albeit at a much lower base.

And that is not a bad thing. With the huge overhand of resale homes on the marketplace and the secondary group of homeowners waiting to put their home on the market waiting for demand to pick up, we will need new home starts to remain low for the near term.

But this indicator is at least pointing in the right direction for the base to form.

There is still a huge overhang of existing home inventory for sale (especially distressed inventory including short sales and REOs), and until that inventory declines significantly, starts and housing prices will remain under pressure. However this report does provide some minor positive news for starts – especially starts for single unit structures. via Calculated Risk

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