The market reacted to some lower than expected data on housing starts. While many were expecting a modest increase, few were expecting such a double-digit drop. I believe that this is good news for the future health of the housing market. Sales are the key...we need existing inventory to be absorbed BEFORE we start adding to inventory. Sales should be the leading indicator...not starts.
Tech Ticker tells the story of supply equilibrium in this link. April housing starts.
Here is the AP story on housing data and the impact on stocks.
I have also included some insight from CNBC this morning. This was taped shortly after the data was released.
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3 comments:
In my experience April is always a crappy month no matter what the market. No conclusion should be drawn from marginal variations in April data.
I tend to believe that "sentiment" surveys are the econometric version of wetting your finger and holding it up in the air to see which way the wind is blowing. Today there was an surprising increase in a key indicator on economic activity, see http://finance.yahoo.com/news/Economic-indicators-up-more-apf-15315887.html?sec=topStories&pos=4&asset=&ccode= . These kinds of measures are more interesting to me.
Rich,
You are right on the money. The current inventory of homes both new and used needs to be absorbed. The inventory of foreclosures really needs to be absorbed before we can start to see any appreciation in housing prices.
Once we have inventory leveled we can start growing our industry again. It will be years before we reach 2005-6 production levels, but rebound we will.
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