Making Sense of Housing Starts

by Alex Stenback on December 22, 2005

Doubtless you’ve seen the chatter on this week’s housing starts report (starts jumped an unexpected 5.3% in November, and the two previous months were revised upward.) For a couple of months now, we’ve seen a very mixed set of real estate stats – some confirming a slowdown, others suprisingly strong – so how do we make sense of this choppy data? 

Enter Barry Ritholtz who as always, absolutely nails the reason why housing starts shouldn’t be used to assess the health of the real estate market going foward.

Builders build — and keep building. They do not try to guess when the cycle will end…Even in the most severe slow down, the end game is merely the cost of doing business, and hardly dents the accumulated profits of the prior 3-5 years. So rather than just guess when the music will stop, they simply keep on building — until sales slow dramatically.

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