Housing Starts – or the number of new permits to build residential homes – was down last month by 10.6% over the month before. Economists generally expected housing starts to be up by 1.5%.
That’s a 12.1% swing to the downside from expectations. In other words, there is just not that much building going on out there. To be expected? Well, sure. But not quite that little building!
My take? I feel for the builders out there who are treading water, trying to stay afloat. That is a hardship for a lot of families. Having said that, I think it is generally a good thing that housing starts are so far down, because it helps focus the home buyers who are in the market on the existing inventory. And until that is gone, home prices will continue to be depressed – which is a good thing for home buyers, but we do hope to turn that trend at some point, and wading through the existing inventory of homes is the only way to help stabilize home prices.
But there is another reason why housing starts are so far down. In a lot of areas of the country – including metro Atlanta – a home buyer can purchase a home for less than the cost it would take to construct that home new. So, home builders simply cannot compete with the existing inventory without losing money.
What does that mean for rates? Well, if that were the only economic number this morning, then mortgage rates (i.e. bonds) would rally and rate would fall lower. Which will will likely see over the course of the day. However, CPI (Consumer Price Index) numbers also came out this morning, and they show consumer prices going up slightly, which is just slightly inflationary. And, as avid readers of this blog know all-too-well, inflation and bonds are like oil and water. They don’t mix.
Initially this morning rates are just slightly higher than yesterday, but overall the news is good for mortgage rates, and they will settle right back down to the lows we have seen over the past week and a half.
Bottom line: If you are a home buyer, you are in the cat bird seat right now. Take advantage.
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