Housing Starts: Is the Worst Behind Us?

Housing Starts: Is the Worst Behind Us?

After boosting construction in February, March, and April, in May homebuilders saw housing starts drop to a seasonally adjusted annual rate of 1.474 million units, according to a Census Bureau report released recently.

The housing market isn't as bad today as it was in the early 1990s or early 1980s, but outlooks have worsened in the past month. Homebuilders have tried to lure buyers with price cuts, but tighter lender standards and rising mortgage rates have been too much to bear, leaving builders with a glut of unsold homes.  Fixed-rate mortgage rates have jumped nearly 60 basis points since May 1st.

The good news is that as builders scale back, inventories of new homes may slowly decrease.

The worst may be behind us.  Action Economics Chief Economist Mike Englund expects starts under construction to fall at an 8% rate in the second quarter, half the 17.7% rate of decline in the first quarter.  Housing starts are on the rise in certain regions.  In May starts jumped 16% in the Northeast and the Midwest.  In the same period, they fell 2% in the South and 20% in the West.

What do you think?  Is the worst behind us?  We'd love to hear your comment by clicking the comment link below.