Housing Starts jumped last month as builders got back to business. It’s a telling sign for the economy, but bad news for next season’s sellers.
With more homes coming online, home prices may be slow to rise nationwide.
A “Housing Start” is a privately-owned home on which construction has started. In November, starts rose by nearly 9 percent while remaining within the same tight range we’ve seen since June.
More interesting that Housing Starts, though, is the accompanying data for Housing Permits. After a 5-month plateau, Housing Permits finally broke through, posting its largest number in 12 months.
This, too, bodes poorly for sellers.
Housing permits are precursors to housing starts so because the number of permits are higher today, we expect that the number of starts will be higher just a few months from now.
According to the Census Bureau, 82% of homes start construction within 60 days of permit-issuance.
More permits means more starts which, in turn, leads to a larger home inventory. And when home supplies grow faster than the home demand, prices fall.
Throughout the early part of 2010, low mortgage rates and federal tax credits should help hold demand high but if builders flood the market with new, quality product, sellers may find that they’ve lost some of their leverage.
For home buyers, the rise in starts is welcomed.