Wednesday, October 17, 2012

Housing Really Starts

Said the home builder Joey Ferraro*:
"I'm working like there's no tomorrow.
Though the fiscal cliff looms,
The consumer assumes
It's the best time to buy and to borrow."

The Census Bureau reported new residential construction today for the month of September, and stunned everybody with a 15% increase in housing starts. Ground was broken on an estimated 872,000 homes, versus 758,000 in August. Analysts, the most optimistic of whom had predicted 800,000 starts, were completely surprised; even Jack Welch, maintaining his Twitter silence from the safe distance of Quito, did not cast aspersions on this unbelievable number.

What unanticipated factors led to this surprising result? For one thing, as we read in the Journal today, a gradual improvement in the housing market has reduced the supply of unsold homes to six months, from eight months a year ago. But, aren't the threat of the fiscal cliff as well as tax and regulatory uncertainty putting a damper on economic activity? Not for home buyers, apparently. They appear to realize that, with home prices rising and mortgage rates at record low levels, there may never be a better time to act.

*All Joey Ferraros appearing in this work are fictitious. Any resemblance to real Ferraros, living or dead, is purely coincidental.

Note: this post appeared originally in the Wall Street Journal's Total Return blog.

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