New home construction up 30% from last year

Marketplace Contributor May 16, 2012

Jeremy Hobson: Well here in this country, we learned this morning that more people started construction on new homes last month — housing starts, as they’re called were up 2.6 percent; compared with last April, home construction was up almost 30 percent.

For more, let’s bring in Josh Brown of Fusion Analytics. He’s with us live as always from New York. Good morning, Josh.

Josh Brown: Good morning.

Hobson: So what do you make that — up 2.6 percent; up 30 percent from last year?

Brown: It’s an encouraging sign. Keep in mind, the housing market is a quilt, and this is one of the pieces of patchwork, and it’s certainly something that you want to see. I think what’s interesting is that builder confidence is at the highest level that it’s been at in five years this month, which kind of gives you a sense of what the outlook is from the guys that are actually doing the permitting and starting the work. So we are happy to see that.

Hobson: And I know that one of the big problems with the housing market all along was that there’s been too much inventory — too many houses out there on the market, unsold. How are we standing when it comes to that right now?

Brown: So, the good news is, what we’ve managed to do in this country is take the inventory of unsold homes down from a 11 month supply to a six month supply. And then when you add in something like this new permits and home starts number — you know, new home sales is 20 percent of the total home market. Every new home that gets built creates three new jobs over the course of a year, and generates about $90,000 in taxes on average. So it’s an encouraging sign; it doesn’t do much for the fact that we’re still loaded with foreclosed properties all over the country. But again, let’s take the good news as it comes.

Hobson: And any sense at this point of what is causing this uptick in housing activity?

Brown: You know, I don’t think that there’s any policy that we can point to that’s helping and that’s making these numbers improve. I think it’s a combination of ultra-low mortgage rates — the lowest ever. Even though it’s tough to qualify for a loan, again, it doesn’t hurt that borrowing costs for people that can afford it are low. And then time — and time is really the essential component to any kind of boom-bust cycle when you’re trying to work off the excesses; and it’s been a long time.

Hobson: Josh Brown of Fusion Analytics, thanks as always.

Brown: Thank you.

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