Home builders' shares are trading higher on the day, and many are ascribing
the gains to this morning's data on housing starts. It would be a mistake
to use the data on housing starts as a gauge of the health of the housing
market, except as a gauge of the impact that construction trends might have
on the overall economy.
More to the point, with respect to the housing
sector's underlying health, are data on sales and inventories. These are
provided in the monthly reports on new- and existing-home sales.
One of the oddities of today's focus on the stronger-than-expected housing
start figure is the fact that increased construction activity will boost
home inventories, worsening the greatest ill facing the housing sector.
Hence, it is the improved mood associated with the housing starts
figure -- the idea that housing may not get much worse -- that is helping
sentiment toward housing today. For a true, lasting recovery, sales and
inventory trends must stabilize.
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Tony Crescenzi Blog Good CPI a Bit Fluky 4/17/2007 9:57 AM EDT Some measures tamed the number.
Tony Crescenzi Blog Markets Are Easing for Fed 4/16/2007 3:25 PM EDT Powerful influences are providing stimulus to the economy, reducing the need for Fed rate cuts.
Tony Crescenzi Blog Builders Still Pessimistic 4/16/2007 1:22 PM EDT An industry index shows continuing declines amid burdensome inventory levels.
Tony Crescenzi is the chief bond market strategist at Miller Tabak + Co., LLC, and advises many of the nation's top institutional investors on issues related to the bond market, the economy and other macro-related issues. At the request of the Federal Reserve, Crescenzi is a regular participant in the board's Livingston Survey of economic forecasters. He is also the author of the revised investment classic, The Money Market,
first published in 1978 by Marcia Stigum, and The Strategic Bond Investor. At the time of publication, Crescenzi or Miller Tabak had no positions in the securities mentioned in this column, although holdings can change at any time. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Crescenzi also is the founder of Bondtalk.com, a popular Web site covering the bond market and the economy. Crescenzi appreciates your feedback; click here to send him an email.
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