Surprise! There’s some life in housing after all. U.S. construction starts and building permits jumped to a 1-1/2 year high in November as demand for rental apartments rose, suggesting a downtrodden housing market may be entering a tentative recovery. But will this be another in a long string of bottom-bounces? Or is it the start of a trend?
Starts surged 9.3 percent to a seasonally adjusted annual rate of 685,000 units last month, the highest level since April last year and well above the Reuters consensus forecast of 635,000. Stephen Stanley at Pierpoint Securities was reticently enthusiastic:
Could it be? Is the housing sector finally beginning to stir? It is a little premature to declare victory, but the data are starting to point to some stirrings in residential construction activity. To be sure, we should not be entirely surprised. New home inventories are far and away lower than they have been in decades.
Still, Stanley was all too aware of the sector’s worst kept secret – a stalled foreclosure process has the potential to delay a broad-based recovery for a while to come.
Of course, there is that nasty little overhang of existing homes associated with the ongoing foreclosure wave. While home buyers are slowly chewing through this problem, much more remains to be dealt with. Nonetheless, as time goes on, foreclosed homes are becoming an increasingly less appealing substitute for a new home. Some folks simply want to live in a new house, and for them, a foreclosed home won’t do. As a result, I am not surprised that housing starts, new home sales, homebuilders’ sentiment, etc. are starting to move somewhat higher even though the foreclosure problem is not yet completely resolved.