From Bloomberg :
U.S. Economy: Housing Starts Unexpectedly Increased in February
By Shobhana Chandra and Courtney Schlisserman
March 17 (Bloomberg) -- U.S. housing starts in February unexpectedly snapped the longest streak of declines in 18 years, raising optimism the market may be finally finding a floor. This nonsense search for a "floor" will end up making people who use to be rich, but became poorer, well,,, poorer! If one were to take their head out of the staid economics tomes and simply look around one would notice that the last thing one needs around here is more houses.
Work began on 583,000 homes at an annual rate, a 22 percent increase from January that was propelled by a surge in condominiums, apartments and townhouses, Commerce Department figures in Washington showed today. A separate report showed gains in producer prices slowed, underscoring a lack of inflationary pressures with the economy in a recession. Even worse than more houses is more condominiums! Peruse any dense or populous urban area and you will be perusing significant excess condo inventory, sitting right next to condos under construction, probably accompanied by condos who didn't get started yet due to oversupply and a dearth of last minute financing - all most likely surrounded by condos that are not selling very quickly, engulfed by rentals who are really converted condo units that couldn't sell --- and somehow some are rejoicing about a surge in condo unit construction!???
"It's a bit too early to get too excited, but we are nearing the bottom in housing," said Scott Anderson, senior economist at Wells Fargo & Co. in Minneapolis, who had forecast an increase in starts. I betcha we aren't! Look at a graph of inflation-adjusted housing prices and explain to me just why any fairly bright, objective person would think we are nearing a bottom in pricing given the current credit and macro environment.
See also "Will someone tell our government that you can't legislate high asset prices?", "I guess I need to go back to DC", and Regarding Housing Price Decline, You Ain't Seen Nothing Yet" for more o this topic.
The lifting gloom pushed up builder shares, led by gains at Toll Brothers Inc., the nation's largest developer of luxury homes, and Miami-based Lennar Corp. The Standard & Poor's 500 Supercomposite Homebuilding Index advanced 3.7 percent to 184.19 at 12:09 p.m. in New York. For those who have the heart to short single digit companies, this may be your chance. As if these guys actually need more competition in selling their properties in to a poorly financed, broken balance sheeted, glut of buyers during a near depression!
Building permits, a sign of future construction, rose less than starts, indicating construction may again slow. Of course they did! The surge in condo development is a glitch, most likely stemming from lenders trying to create finish product out of non-performing loans. Ask Corus, the Florida condo development loan specialist. I was short the in '07, they trade at about $2 now. Or maybe you can take the disucssion up with IndyMac bank? Developers are still contending with record foreclosures that depress prices and profits, and put pressure on the Federal Reserve, which meets today and tomorrow, and the Obama administration to solve the credit crisis. The banks are some of the developers biggest competitors as they dump foreclosed and REO inventory back onto the street at firesale less a bargain prices.
Starts were projected to fall to a 450,000 annual pace, according to the median forecast of 71 economists surveyed by Bloomberg News. Estimates ranged from 400,000 to 500,000. January's starts were revised up to 477,000 from a previously estimated 466,000. Yeah, stats and projections. How many rich economist do you know of who made their money by predicting the market accurately????
Permits increased 3 percent to a 547,000 annual pace. They were forecast to drop to a 500,000 annual rate, according to the survey median.
"You get the sense from a lot of the data coming out now that we're beginning to get to a bottom," Nariman Behravesh, chief economist at IHS Global Insight in Lexington, Massachusetts, said in an interview with Bloomberg Television. "We're not quite there yet." Not even close. It was more than 25 years before the housing market recovered during the depression.