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

As 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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• Building permits surge to 17-month high (money.cnn.com)
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More Signs the Real Estate Market is Getting Better

Once again, the housing market is showing that its worst days may be over.

According to the Census Bureau, the number of new homes sold in June leapt by 11 percent from the month prior. It stands as the biggest one-month jump in 8 years.

A "new home sale" is when a home in any stage of construction -- not yet started, under construction, or already completed -- goes under contract, often with a builder. It's the opposite of an "existing home sale".

In addition to surging sales, the monthly supply of new homes fell to its lowest level in 11 years. In our market, where there are not as many new homes as in expanding markets out west or in the retirement areas of the south, this supply is not perhaps as significant, but the number is important nonetheless.

Because home values are based on the relative supply and demand for a particular home in a particular area, anytime that demand for homes grows faster than supply, we would expect prices to rise.

Indeed, that's what we've been seeing. The combination of low interest rates, seller-paid incentives and a first-time home buyer tax credit is bringing buyers into the market faster than new supply can come online. It's one reason why home prices have stopped falling across many parts of the country.

It's also why home buyers may find it tougher to get "a good deal" in real estate later this year and into 2010. If demand stays high and supplies fall further, sellers should regain the upper-hand in contract negotiations. Brokers are already seeing signs of of this in the number of "low ball" offers that are being rejected by sellers in favor of better offers and the re-emergence of multiple offer situations on well priced homes.

The History of 1708 Welsh Road

In real estate, as in most sales oriented businesses, we're taught to set goals. I always set larger goals that were a little open to interpretation.

For example, I knew I wanted to be a real estate investor, but I didn't say I wanted to own 3 or 5 or 7 properties. All of my goals were clear and achievable, but open to a little flexibility.
One of my goals as a young man was to own an architecturally significant" piece of real estate. I wasn't sure what that meant, but I coined the phrase to indicate that I wanted to own a cool looking building that was somehow pretty neat.

A number of years ago , I co-signed for a friend, and ended up getting stuck with an old building that had been vandalized. It was an old house that had been getting old and weathered when I was a very young boy.

Trying to make lemonade out of the lemon I got stuck with, I had plans drawn up to make the property into offices, figuring that I would rent each office like an office suite. As my company grew, I got too busy to get involved in what seemed to be a huge project, until 2004 when we really needed the space for our company.

Sure enough, the job was a massive undertaking, and it seemed like there were problems at every turn, but after about 7 months, we were ready to move in to our new home.

The building, a Queen Anne Victorian with a large porch, turret, and stone finish, had turned out pretty well, and though the interior was great office space, the front of the building had been restored to something that we thought might approximate the original home.

Then my friend Eileen Wulko brought in a history book owned by her dad Joe McDermott Sr. In the book was a picture of our office taken in the very early 1900s showing the house, old phone lines, electric street lights, and an old car driving up Welsh Road to Bustleton Avenue. I was thrilled to see that the house (form the street) looked pretty much the way it had 100 years earlier,

A couple of years went by, and I got a call from a man named Barclay Thorne who said that his grandfather had built the property (and the house next door) and that he had pictures of the construction of the home.

We met and he was kind enough to allow me to scan the photos of the building of the property, pointing out the architect holding the drawings in one photo, and sharing with me stories of his family.

The video here is comprised of some of those photos, the photo found by Joe McDermott, and some photos of the renovation of the building in 2004.

Courtesy of RealEstateShows, here is a video montage of one of the oldest homes in the Bustleton section of Philadelphia. My "architecturally significant" office, and the completion of one of my goals.