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New Home Construction Starts Higher In November

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While some believe this to be the end of the five-year housing boom, let me remind readers that pundits said that last year, only to be wrong when scarce inventory and record buyer demand pushed prices and sales higher earlier this year. Here’s a snippet from the St. Petersburg Times article speculating on a slower market and reporting higher new construction starts for November:

New home construction unexpectedly increased in November at the fastest pace in seven months in what could be a final flourish for the nation’s 5-year-old housing boom. The Commerce Department reported construction activity rose by 5.3 percent in November from the October pace, when housing construction had fallen by 6.6 percent.

New home construction starts are higher due to increased demand. While builders were skiddish in October, it’s clear that they were more optimistic in November. My feeling is that lower gasoline prices had a lot to do with changed builder outlook. This was not noted in articles noting higher new construction starts, but it has great influence on homebuyer outlook, as do other things, such as mortgage interest rates, which are still at record lows, even with recent rate increases by the Fed.

-John Mudd
“Mr. Real Estate”

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  • Bliffle

    I think the realestate market is continuing upward. I put more capital in because the plateau hasn’t depressed the market just freed up a few good deals, like distress sales.

    There will be a reckoning for the profligate disregard of financial discipline by the current crop of drunken spenders in DC, and that correction can be either radical depression or inflation. We had depression 70 years ago and nobody liked it, neither working people nor investors and businessmen, so don’t expect that. In the intervening time we’ve learned to use inflation to solve stasis problems. Government sentiment will grow in favor of inflation under Bernanke who is an “anti-deflation” hawk. Even old Greenspan, usually described as anti-inflation, was pretty pro-inflation when it served His Masters (GWB) purposes. Was it Arthur Burns who said “I’ve got to do what the pres tells me to do so that the Fed maintains it’s independence” (how romantic; perhaps he made an impression on Rumsfeld).

    All that inflation does in real terms is increase the value of flow control. Successful investors of the future will not buy-and-hold (as parents told us to do, as well as many unsuccessful brokers) but move between and within markets.