Wednesday, September 22, 2010

Housing starts

Housing starts which are released every month is a good barometer of economic activity and tend to a pretty decent leading indicator. Since 1959 there were very few months in which housing starts were less than 1 million for the month, in fact prior to this current economic mess there was only 1 month which starts were below 800k and that was in 1991, close to the last bottom in housing prices. Currently we have had 23 months of housing starts below 800k, conversely we had too many housing starts over 2 million per month that began in 2004 and helped lead to too much supply on the market. Today with builders closing up shop such as Simonini and housing starts remaining at the lowest levels since at least World War II, it is only a matter of time before supply dries up and natural demand created by an increasing population and household formation start moving prices back up. With interest rates at some of the lowest levels ever seen don't wait too long to buy that dream home.

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