Housing Starts Climb More Than Expected
The Census Bureau and the Department of Housing and Urban Development report that housing starts climbed more than expected in March. Builders applied for 685,000 permits (60,000 more than expected, up from 637,000 in February) and filed 626,000 housing starts (16,000 more than expected, up from 616,000 in February).
On one hand, this is good news. It signals that homebuilders believe that supply and demand have stabilized, that housing prices might turn up and that the economic outlook is sunny. On the other hand, at least two of those presumptions are questionable. Foreclosures are increasing, not decreasing; and some economists estimate that home values have another 10 to 20 percent to fall.
That said, we’re missing a crucial piece of information in the release — as always in real estate, “location, location, location.” The Census release breaks starts and permit applications out by region, but not by state. And the housing bust continues to be heavily concentrated in a few states — California, Florida, Arizona and Nevada being the worst-hit. I think we’ll continue to see state stratification in the housing market, with the real estate market returning to normalcy in most regions, but those states continuing to struggle with oversupply, poor general economic growth, and falling prices.