Why Home Buyers Should Worry About Falling Housing Starts And Why Sellers Should Cheer Them

Housing Starts add to inventory levelsWith respect to housing data, news is rarely positive or negative on a universal level. There’s always two perspectives to consider, after all.

  1. The home buyer’s perspective
  2. The home seller’s perspective

Usually, when data is beneficial to one group, it’s less beneficial to the other.  This is true for rising home prices, average days on market and so forth.

Today, the group that gets the most benefit from data is the home seller group.

Published Thursday, a government report showed that Housing Starts fell 11 percent nationwide in March and also fell short of analyst expectations.  A “Housing Start” is a new housing unit on which construction has started.

The press is calling this a stumbling block for the economy, but that’s not exactly true.

Fewer Housing Starts last month means that fewer new homes will come on the market later this year.  This is not necessarily bad news.  Especially if you’re planning to sell your home in the latter half of the year.  With fewer homes for sale, the supply-and-demand curve should shift in favor of home sellers.  This helps stabilize home prices at a time when they might otherwise be prone to fall. 

If it’s true that stable housing markets are key in an economic recovery, then fewer Housing Starts is actually a push in the right direction.

But there’s more to the story (as always). 

As footnoted in the Commerce Department’s report, a statistical disclaimer states that the Housing Starts data’s Margin of Error was so high that the report’s conclusion is just a guess.  Technically, the entire report is invalid anyway

So, the government won’t issue its final March 2009 Housing Starts data for months, but if the initial figures stick, home sellers may be in position to command higher sale prices later this year to the detriment of home buyers.  It’s basic economics. 

And from a home seller’s perspective, that news is good.