Friday, July 17, 2009
Housing starts in June rose to the highest level in 7 months, after falling for 3 1/2 years to the lowest levels since records were first kept in 1959. Residential construction as a percent of GDP also fell to its lowest levels ever. After languishing for 9 months, the stocks of major home builders are now beginning to rise. It would appear that we have finally seen the bottom in the housing construction market.
This is good news for housing in general, since it means that the inventory of excess homes has been cut substantially, and will likely fall further unless construction starts ramping up soon. This will help put a floor under housing prices. And to the extent we can feel better about housing prices no longer falling, that should provide a huge boost to the financial market, since it eliminates a big source of the uncertainty underlying the valuation of subprime mortgages and the institutions that hold them.
Posted by Scott Grannis at 8:04 AM