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Housing starts dip, is this good news or bad news?

According to the U.S. Census Bureau, single family housing starts fell below expectations dropped 4.3% in December, and a total 8.2% from December 2009. This drop is the lowest since May 2009.

It’s not all bad news, in fact, in a strange turn of events, multifamily starts rose- a sector that has been limping along. Housing completions are up across the board as well meaning projects aren’t just getting started then sitting there. Housing completions mean vendors and subcontractors are getting paid which can be tricky in this environment of extremely difficult financing.

Also surprising was the volume of building permits issued which rose 16.7% from November, also breaking with economists’ expectations. This rise is the largest since April 2010 and multi family permit issuance rose to its highest since November 2008.

Multi family is seeing an upturn as home ownership rates are chipped away at by continuing high foreclosure rates and general buyer apprehension.

So is it good news or bad news?

In this environment where we’re still in a relatively over inventoried marketplace as a nation, it is actually better to see stable housing starts (which I would argue they are getting close to as rise and falls this past year have mostly been single digit).

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The short term impact is negative on the construction sector but the silver lining for them is that permit applications and issuances are on the rise, so the hammers won’t stop swinging soon. With completions on the rise, construction workers can more readily finish one project and move to the next which helps their bottom line.

I would argue that the new home sector is down considerably over the years but is currently stable and looking up and builders’ confidence levels tend to agree.

Lani is the COO and News Director at The American Genius, has co-authored a book, co-founded BASHH, Austin Digital Jobs, Remote Digital Jobs, and is a seasoned business writer and editorialist with a penchant for the irreverent.

6 Comments

6 Comments

  1. Short Sale Artisan

    January 20, 2011 at 4:21 pm

    Well housing starts staying lower are obviously critical to clearing inventory. That said, the lag is enough that starting too late means an lack of available housing (although I think we are very, very early on that point!)

  2. Ruthmarie Hicks

    January 20, 2011 at 7:13 pm

    Our area didn’t go “hog wild” with building. The exception being high end condos – particularly high rise. So much of the area is built up and the rest is on wetlands. However- the last thing we need – or anyone else needs – is a bunch of brand spanking new inventory competing with resales when the market is moving at a glacial pace. So I say its a good thing.

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