Housing Starts Drop through the Floor in November, but Nobody Cares

Housing starts in November were at a seasonally adjusted annual rate of 625,000.  This is 18.9 percent below the revised October estimate of 771,000 and is 47.0 percent below the revised November 2007 rate of 1,179,000.  November 2008 housing starts down for 47% from November 2007.   In normal times the stock market would plummet and the bond market would rise driving interest rates into the ground.  As of this writing, the stock market is up roughly 1-2%.  The 10 year Treasury bond is yielding 2.52% this down from 2.53% on Monday.  Clearly, housing starts is of little concern to the financial markets. Perhaps even a poor showing by housing starts is a good sign.  The constructions industry has been in a slump since 2007, lower housing starts are not going to have a significant impact on the already low, low construction employment levels.  Home sales are quite possibly still over inflated and the number of units sold may very well decrease in the months ahead.  Lower housing starts will simply help keep the supply of homes from increasing.  The economy has a long way to go to absorb the existing overhang of homes for sale.  Those economists that believe housing sales will increase are grossly mistaken.  Existing home sales is not even close to a significant recessionary number.  The number of sales over the last 3 months can sustain normal economic growth.  This is not necessarily true of retail sales.  The problem with housing is the supply of homes on the market.  Low housing starts isn’t being ignored, it is considered a good sign for future sustainable economic growth.

This entry was posted on Tuesday, December 16th, 2008 at 2:17 pm and is filed under Economic Statistics. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.