The news that housing starts fell in March after an unexpected rise in February is considered bad news. Add the fall in new building permits and the analysts are in a funk. I understand this, a lot of our economy over the last decade has been fueled by aggressive home building and sales. But wait, wasn't that what got us into trouble? Hmmm.
Perhaps we should be pleased that new home construction has declined? I'd like to see a revised "normal" level of new home construction, a lower normal. There is plenty of housing stock in the marketplace judging from real estate inventories and foreclosure rates. We don't really need a lot of new housing at this point (we really don't). I'd like to see some home improvement and rehab tax credits. That would stir up some activity in the sector without adding more inventory. The additional inventory only puts more downward pressure on the price of existing homes. The mortgage loan limits -- at $417,000 across much of the country -- have already put a damper on sales of homes costing more than $500,000.
There is also a direct correlation between construction and unauthorized immigration. Construction became a major source of jobs for workers entering the country illegally. As housing starts declined, so did illegal border crossings. At a time when municipal budgets are being cut by declining tax revenues, the fewer people municipalities need to support with social services the better (please note, this is by no means an anti-immigration rant, just a sliver of economic data to consider).
Home builders are still cranking out 500,000 new homes a month.There are approximately 308 million people in the U.S., and the population is growing at just under one percent. Those 308 million people live in a combined 130 million housing units. Even if every new American needed a new house, just for themselves, we would need approximately 2 million new homes. At the current rate of new home construction we would meet our annual need in 4 months.
Granted, factors like population shift to the Southwest mean less demand in some areas of the country and more demand in others. Housing starts are much more likely in high-growth areas, but they are by no means limited to those areas.Too many jobs have become dependent upon new home construction, and new housing starts seem to have as much to do with keeping those jobs than meeting actual demand (starting to sound like the U.S. auto-industry?) A contracting new home construction industry will be painful, but in the long run those resources would be better utilized creating something we actually need.