Why Lower New Housing Starts are a Great Thing!

Each month we see statistics from the government on New Housing Starts.  In traditional times a positive number month over month and year over year is a great thing, but not this time and here is why.

First, as anyone in the industry knows we have a glut of existing homes on the market.  In fact many of these homes were constructed within the last 3 or 4 years and some have never been lived in.  With housing starts staying down, this allows the excess inventory to burn off.

Second, most new housing starts, particularly in Florida begin in new subdivisions or part of tract housing.  These new developments put added pressures on cash strapped local governments to provide infrastructure, particularly for governments that have poor comprehensive plans in place.  The focus now should be on density and filling in existing homes, rather than starting new communities that contribute to both urban sprawl and infrastructure pressure.

Third, in my opinion sales of existing homes rather than new construction homes provide an immediate impact on our economy.  While, new construction provides construction jobs, the sale of an existing home can boost both construction jobs and other areas immediately.  Areas of immediate impact occur for real estate agents, title companies, mortgage lenders, attorneys and accountants.  Rather than waiting for a 6 to 8 month construction of a new home and existing home can close quickly and the economic benefit is immediate.

So while we see this month’s new home construction numbers fall, take heart, this is actually a great sign.