The Economic Importance of Better Housing Starts
One of the most talked-about economic statistics these days has got to the be housing starts.
In December, the Commerce Department noted an 8.
9% increase in housing starts for the month of November.
Supporting this obvious strength was a nation-wide increase in applications for housing starts, which also increased 6% from the previous month.
The implications of greater housing activity is rather clear.
With greater housing activity, we are led to believe that house prices will start to turn around as demand starts to build.
This may not be entirely true, however.
Since housing starts are still roughly 50% of the highs earlier this decade, there is still a lot of growth ahead before demand even starts to push prices back to previous highs.
Realistically, housing starts numbers make for positive news for the economy as a whole because housing touches so many industries.
More importantly, housing touches a lot of individuals.
Consider the trades, for example, which were one of the hardest-hit groups of people when the housing bubble burst in the first place.
In addition, improved housing starts implies that mortgage lenders will start lending money for mortgages again.
This is positive because as banks start making smarter loans, they will be able to help stimulate other areas of the economy that may not require such "smart" lending (like credit cards, auto loans and so on).
And speaking of automobiles, as people begin to see asset values appreciate, they will be more inclined to draw on that equity and make larger purchases like big appliances, electronics and, of course, vehicles.
Ultimately, the common saying that "this time was different" remains true because the economic crisis that was caused by poor financial decisions on the parts of banks helped kill a housing market that was over-inflated to begin with.
This meant over-supply and fire-sale prices that helped no one and in fact had something of a ripple effect through the rest of the economy.
Now that housing is finally turning around, there is plenty of hope for the rest of the economy.
In December, the Commerce Department noted an 8.
9% increase in housing starts for the month of November.
Supporting this obvious strength was a nation-wide increase in applications for housing starts, which also increased 6% from the previous month.
The implications of greater housing activity is rather clear.
With greater housing activity, we are led to believe that house prices will start to turn around as demand starts to build.
This may not be entirely true, however.
Since housing starts are still roughly 50% of the highs earlier this decade, there is still a lot of growth ahead before demand even starts to push prices back to previous highs.
Realistically, housing starts numbers make for positive news for the economy as a whole because housing touches so many industries.
More importantly, housing touches a lot of individuals.
Consider the trades, for example, which were one of the hardest-hit groups of people when the housing bubble burst in the first place.
In addition, improved housing starts implies that mortgage lenders will start lending money for mortgages again.
This is positive because as banks start making smarter loans, they will be able to help stimulate other areas of the economy that may not require such "smart" lending (like credit cards, auto loans and so on).
And speaking of automobiles, as people begin to see asset values appreciate, they will be more inclined to draw on that equity and make larger purchases like big appliances, electronics and, of course, vehicles.
Ultimately, the common saying that "this time was different" remains true because the economic crisis that was caused by poor financial decisions on the parts of banks helped kill a housing market that was over-inflated to begin with.
This meant over-supply and fire-sale prices that helped no one and in fact had something of a ripple effect through the rest of the economy.
Now that housing is finally turning around, there is plenty of hope for the rest of the economy.
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