Patrick.net

U.S. Housing Starts Jump 9.3% - Why is this good news?

By tdeloco   Follow   Wed, 21 Dec 2011, 12:01am   1,079 views   6 comments
Watch (0)   Share   Quote   Permalink   Like   Dislike  

The rise in stocks today (Dec 20) were attributed to this news:
http://www.bloomberg.com/news/2011-12-20/housing-starts-in-u-s-increase-to-highest-level-in-year-in-stability-sign.html

However, I think this is counter-intuitive. We all know supply and demand from basic economics. This increases supply, not demand. So why is this good news? Doesn't it add downward pressure to house prices.

Viewing Comments 1-6 of 6     Last »     See most liked comments

1. EightBall Follow Befriend 12 threads 495 comments

   1   6:46am Wed 21 Dec 2011   Share   Quote   Permalink   Like   Dislike   tdeloco says However, I think this is counter-intuitive. We all know supply and demand from basic economics. This increases supply, not demand. So why is this good news? Doesn't it add downward pressure to house prices. Perhaps the market thinks that an increase in starts means an increase in demand? Perhaps the price of new construction has found parity with resale homes? It has always been my view that housing can't drop below the cost of construction persistently. Eventually inventory will need to be increased to meet increasing household formation or "migration". Have we hit that point? In some places yes, in other places...maybe not for a long time. As long as the population keeps increasing we will need to keep building. There are a lot of factors involved (move-in-with-the-parents crowd, cracker box rentals, etc) but eventually demand will outpace or catch up with supply. When will this happen as well as where is the million dollar question.

2. FortWayne Follow Befriend (13) 102 threads 3,759 comments

   2   2:16pm Wed 21 Dec 2011   Share   Quote   Permalink   Like   Dislike   They usually build when demand arises. So most likely demand is there. I wouldn't attribute that to stock market going up. It's been volatile with swings because of all the automatic buy/sell computerized trades. I don't think it has to do with the news of someone building more apartment buildings.

3. everything Follow Befriend (2) 3 threads 546 comments Madison, WI

   3   7:22pm Wed 21 Dec 2011   Share   Quote   Permalink   Like (2)   Dislike   It's news because someone is spending money. When the banks won't lend to you then rent instead, rental vacancies are down, gotta fill that void, investors aplenty I'm sure.

4. APOCALYPSEFUCK is Shostakovich Follow Befriend (28) 169 threads 4,153 comments Premium

   4   7:32pm Wed 21 Dec 2011   Share   Quote   Permalink   Like   Dislike   Protected   It's probably fiction, cooked up by a criminally insane trade association with no more credibility than the NAR. More abandonware for crackheads and hookers to squat and for arsonists to torch.

5. futuresmc Follow Befriend (1) 1 threads 386 comments Buffalo, NY

   5   8:40pm Wed 21 Dec 2011   Share   Quote   Permalink   Like   Dislike   It could also be a function of location. Think of North Dakota and the oil shale. The housing up there, even the spots in the mobile home park, are thousands each month. New housing in heavy demand, low unemployment areas is a good thing.

6. tdeloco Follow Befriend (2) 11 threads 218 comments San Jose, CA

   6   8:56pm Wed 21 Dec 2011   Share   Quote   Permalink   Like   Dislike   The demand for rental is obviously up, but the article mentions both Apartments and Townhomes. With the NAR revising down home sales data, the housing market is actually worse than previously thought. Furthermore, some of these townhomes might end up as high end apartments. If the builders continue to speculate and end up overbuilding, prices will stay low. That's bad for people who currently own property. FortWayne says I wouldn't attribute that to stock market going up They're linked from stock quotes. Then again, these things are probably automated. Either that or some idiot reporters are trying to connect unrelated events.