05/19/09 Baltimore, Maryland We’re confused this morning… help us understand this mess.
Initial construction of new homes in the U.S. fell to the lowest level on record last month, the Commerce Department announced early today. Housing starts in April fell 12.8%, to an annual rate of 458,000, the worst since at least 1959, when the government started keeping track. Applications for building permits fell to a record low as well.
Here’s what we don’t get: The market hates this. Futures were aiming for another day in the black early this morning, and then reversed seconds after the numbers were announced.
But we see the housing starts number as an encouraging development. In the worst housing crisis of our lifetimes – with a 9.8-month supply of existing homes on the market and a record 342,000 homes in foreclosure in April alone – who in their right mind is starting construction on a new house?
If the biggest hurdles in ending the housing crisis are price discovery and clearing supply, and if true recovery is a curtailment of home price expectations and a return to living within our means… why are record low housing starts a bad thing?
At this stage, isn’t the best possible housing start number… 0?
Ian Mathias
Ian Mathias is the managing editor of Agora Financial’s Income Franchise, where he writes and researches about retirement, dividend and fixed income investing. Much of his work is featured in The Daily Reckoning and Lifetime Income Report – Agora Financial’s flagship income investing advisory.
Previously, Ian managed The 5 Min. Forecast, a fun, fast-paced daily look into the future of global markets and macroeconomics. He’s also worked in public relations, where media outlets like Forbes, AP, Yahoo! and MSN Money have syndicated his writing. If he’s not at work, you’ll probably find Ian on a bicycle, racing up and down the “mountains” of Baltimore County. Ian has a BA from Loyola University in Maryland.
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