Commerce Department Data Offers Mixed Signals About Housing
- Nov 20, 2007
The Commerce Department today released its October new residential construction data today. We’re all looking for proof that the housing decline has hit its lowest
point and will begin a correction. But was today’s news indicative of
Well, the report contained some good news: After falling in
September, housing starts set at an annual pace of 1.229 million units
in October. That’s their biggest monthly increase (3 percent) since February — and a surprise to many economists who had said they were anticipating a decline.
Single-family housing completions in October were 2.8 percent above the September figure of 1,127,000. In all, privately-owned housing completions in October were also up at a seasonally
adjusted annual rate of 1,436,000.
That’s still down 6.7 percent from the revised October
2006 rate, but 1.9 percent up from
September’s revised estimate.
And yet … building permits fell. Permits hit a 14-year low in October, dropping 6.6 percent to a 1.178 million unit pace, Reuters reports. (That would be the lowest permit level since July 1993.)
Which might not be as positive as sign as we’d hoped. Higher housing completions and starts are great — but as concern over the state of the economy has grown in recent months, concern that the housing slump will last longer than expected has grown, too.
Since the housing market is considered such a strong economic
indicator, and residential permits are considered an early sign of how
the housing market is doing, a lower permit number sends a serious message.
It’s not uncommon for permits to rise after mortgage rates are lowered — and yet, despite the Fed has done that, we have yet to see an increase.
Will another rate decrease help? Maybe. Although many economists have predicted the Fed is done with rate cuts, minutes released today from the Oct. 31 Federal Reserve meeting revealed that policy makers lowered growth
forecasts last month and are concerned about credit-market losses, Bloomberg reports.
Yesterday, the National Association of Home Builders/Wells Fargo index was released, indicating builders weren’t very confident about the future. Will the building permits pick up on their own? Or will the Fed offer another rate cut to spark a rise in construction?
They’re scheduled to meet on Dec. 11. Until then, we wait and watch.