The decline probably had more to do with weather conditions than anything
else, as is suggested by the fact that building permits fell much less that
starts to a 1.568 million pace from a pace of 1.613 million in December, and
given that permits are now much higher than starts, an unusual condition.
Nevertheless, the plunge underscores a key dynamic that has taken shape in
the housing market over the past few months. Builders have curtailed
building enough to slowly but surely bring inventory levels down. By most
estimates, the supply of new homes is currently falling at an annualized
pace of somewhere between 150,000 and 300,000.
With the inventory of unsold
new homes roughly 300k above normal, inventories will be closer to balance
by the end of 2007 or 2008. There are many variables in this equation,
however, which means that pinpointing the date where inventories are back in
equilibrium is a dicey affair.
P.S. Will you be there when Cramer makes his next move?
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Tony Crescenzi Blog Foreign Sales of U.S. Stocks Hit Record 2/15/2007 2:52 PM EST The net sale was probably related to a shifting of capital from U.S. to European stocks.
Tony Crescenzi Blog Builders Regain Optimism 2/15/2007 2:24 PM EST Data indicate that the rate of decline in the housing industry has slowed.
Tony Crescenzi Blog Weak Philly, but Factories Gaining 2/15/2007 12:19 PM EST Weakness in the automobile sector likely impacted the region.
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 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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