Tuesday, May 11, 2010

Housing Starts Data Hints That Housing Will Expand Even After The Tax Credit Expires

Housing Starts Apr 2008-Mar 2010As a real estate broker whose company's largest concentration is on the existing housing market in Philadelphia and South New Jersey, I only pay a little attentionb to the new housing market. Especially since that market has really been in more of a clean up than expansion mode for the past several years. After all, the existing inventory needs to shrink before we worry about about creating new inventory doesn;t it? It seems that there are indicators that the inventory has been shrinking and that the market has been changing. After a strong March showing and a surprise upward-revision for February, Housing Starts are, once again, trending better.

It's a significant signal that the housing markets in Philadelphia, Mount Holly and nationwide are stabilized.
A Housing Start is a new home on which construction has started and, over the last 6 months, home builders are averaging one half-million starts per month.
This marks the highest 6-month average since 2008 and a reading one-fifth percent better from 12 months ago.  Revisions to prior data have all been higher, too.
Even more interesting, though, is that the number of newly-issued building permits is exploding. Permits were up more than 5 percent last month and have climbed back to the levels of late-2008.
Housing permits are an important data point in housing because permits are precursors to actual housing starts.  According to the Census Bureau, 82% of homes start construction within 60 days of permit-issuance.
Therefore, because March's housing permits increased, we should expect Housing Starts to continue to rise into the early months of summer.
This, too, reflects well on housing because the federal home buyer tax credit won't be in existence this summer. The simple fact the homes are being built now shows that housing is likely to expand even now that the tax credit expires. And, as you may have noticed in my other posts, I sort of think that's happening as well.

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