Tuesday, April 17, 2007

Housing Starts Up .8%

From Bloomberg:

Housing starts in the U.S. unexpectedly rose for a second month in March, bolstering expectations the worst housing slump in 15 years may be easing.

Builders broke ground on new homes at an annual rate of 1.518 million last month, an increase of 0.8 percent from February, the Commerce Department said today in Washington. Building permits, a sign of future construction, also rose 0.8 percent.

Unusually warm temperatures last month encouraged builders to start work on more homes, along with signs that demand is starting to firm as prices moderate. The Federal Reserve predicts the economy will pick up in the course of the year as the drag from housing diminishes, while warning that a wave of mortgage defaults poses a risk to their forecast.

Let's coordinate this report with a few other data points.

1.) Homebuilder confidence is low

The National Association of Home Builders/Wells Fargo index of sentiment fell to 33 from 36 in March, the Washington-based association said today. A reading below 50 means most respondents view conditions as poor.

2.) There is already an 8.1 month supply of new homes on the market. This number has increased from 6.1 months in December 2006. According to the same report, the actual number of new homes on the market has increased 1% over the last year, from 538,000 to 546,000.

Is this really the time to be increasing inventory?