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RealMoney.com: Tony Crescenzi Blog
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The Impact of Today's Housing Starts

By Tony Crescenzi
RealMoney.com Contributor

4/17/2007 11:43 AM EDT
Click here for more stories by Tony Crescenzi
 



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 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.

TheStreet.com has a revenue-sharing relationship with Trader's Library under which it receives a portion of the revenue from purchases by customers directed there from TheStreet.com.



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