Housing Starts Drive To Equilibrium
Housing Starts fell to their lowest levels since 1947 last month.
Image courtesy: The Wall Street Journal
A “Housing Start” is a new housing unit on which construction has started. Building permits are down, too.
Housing data is rarely positive or negative on a collective level — one group of Americans is going to see benefit.
In today’s Market, it’s home sellers.
This is great news for people selling their homes in the coming months. Due to the fact fewer homes are built nationwide, there is less inventory from which home buyers can choose. With fewer homes for sale, we see shifts in the supply-and-demand curve, adding a stronger floor to support home prices.
For home buyers, limited supply equals larger demand.
With fewer new homes coming on the market, owners of “used” homes may feel less pressure to lower asking prices or to make other concessions. Home buyers often pay more when home supply is falling, or find that sellers are less willing to offer seller concessions to a contract.
For all of the analysis that surrounds real estate data, in the end, home prices are based on the supply of homes versus the demand for homes. When supply outpaces demand, home prices fall, and vice verse.
Homebuilders know this and October’s Housing Starts data reflects it.
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