Housing Starts Are Up, but That Means Nothing

Construction workerThe U. S. Department of Commerce reported earlier this week that housing starts for January hit a six-month high, growing 2.8 percent to an annual adjusted rate of 591,000 new units. Therefore the housing crisis is ending, we're told: end of story, if we build it they will come.


Housing starts refer primarily to building permits, which have to be in place generally before builders and developers can get construction financing -- financing that is very hard to come by in the current economic climate. So a start doesn't inevitably mean a finish nor even a true beginning of construction. There are other statistics for those -- statistics the Commerce Department in this case chose not to highlight.
"Forget housing starts, look at units under construction, " says blogger David Rosenberg of Gluskin Sheff, a Toronto-based money
manager. Rosenberg's excellent "Breakfast With Dave" blog is unfortunately for clients only.
"Yes, a 2.8 percent month-over-month rise was nice but the data is notoriously volatile and at a 591K unit annual rate they are actually lower now than they were last July when the tax credit to first-time homebuyers was in full swing. Single-family housing starts did edge up 1.5 percent but that fell well short of offsetting the 3.0 percent December decline and starts are 4.3 percent below the levels prevailing last summer... In January we saw both the number of units under construction and completions hit all-time lows! "

The housing crisis in America is far from over.
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