Tuesday, July 19, 2011

New Home Construction

This morning, the stock market is trading up due in large part to the release of new housing starts number for June that was released by the government this morning.  To be clear, the "new housing starts number" is merely how many new homes started to be built last month.  The number released was 629,000, which was 2.5% higher than the 609,000 that economists had predicted.  While this seems to be a good thing, as the stock market is causing people to think, it's really not because what we ultimately need to see is MORE JOBS BEING CREATED, NOT MORE HOMES BEING BUILT.  We already have a surplus of houses sitting on the market, but because we have so many people unemployed and banks making it so difficult to borrow money, I do not view the data released this morning as necessarily a good thing.
All that being said, when you see on the nightly news where the new housing starts number was better than expected, remember that what we really need to be hearing about is that more people are finding jobs, and therefore have more discretionary income to spend and therefore grow the economy.
As should always be the case, read between the lines...