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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Housing Starts Post 8th Gain in 9 Months

Housing Starts on single-family homes gained last month, marking the 8th time that's happened this year.

A "Housing Start" is a home for which the foundation has been excavated and, considered alongside other key market metrics, September data suggests that the housing market stabilization is complete.

Momentum in housing is overwhelmingly positive:

• Homes under contract are soaring
• National home supplies are way down
• Home values are up in a lot of markets

Despite the positive news, the press is calling September's Housing Starts data a "bummer". Citing a drop in monthly building permits, the media purports that housing will slow in the months ahead.

The conclusion may be right, but the rationale may be wrong.

The probable cause for fewer permits isn't that the housing market is overdone. It's that home builders are choosing to exercise caution given the pending expiration of the First-Time Home Buyer Tax Credit and a still-growing number of foreclosed homes.

It's unclear what housing demand will be beginning in December and the last present a builder wants for the holidays is an excess of inventory.

It makes sense that building permits are down, in other words. In our marketplace, where new homes are not the most significant part of the housing inventory, unlike primarily new home communities like areas of Nevada, a Florida, the increase or decrease of housing starts may be less significant in any case.

Looking back at February of this year, there's a host of signs that housing is on the path to recovery. Now, that path won't be a straight line and there's bound to be setbacks, but September's Housing Starts is not one of them.

Housing Starts are up 40 percent on the year. WHich does indicate that ate the very least we have passed the bottom of this contraction.