Drop in New Home Starts Helps Resale Market

Around the country there are a lot of opinions around the housing market. And there are also a lot of facts and numbers. Noone will debate that new housing starts (the number of new homes initiated to be built) are down around the country. This is, of course a national trend, as local housing starts in some areas are still up.

 new-construction-graph.jpg housing-starts-national.gif

**Side by Side- the National Trend compared to Utah’s**

When new starts do decrease in an area, that’s not always a bad thing for the economy, especially with a market like the nation is in now. The current national decrease in housing starts is different from the decreases we’ve seen in the past as this time it’s mostly a correction.

BusinessWeek says:

“…this housing cycle is different. In the past, housing downturns have been the result of high interest rates and broad economic weakness leading to rising unemployment. This time, housing is going through its own cycle, largely independent of wider economic conditions. The economy outside of housing remains solid: Unemployment is low, household incomes are growing, and 30-year fixed mortgage rates, at a bit over 6.5% in mid-August, are hardly onerous.”

And when new construction slows down it can help the resale market by making it easier to sell an existing home because there are fewer new builds to buy.

If you want to sell your 3 bedroom, 2 bathroom home with 2000 Square Feet that was built in 1998 for $325,000, but around the corner is a new home development selling 3 bedroom, 2 bathroom homes with 2000 SF for $315,000 it makes it tough to sell yours when buyers could just buy a brand new home for the same price. But if those new homes are all sold and there aren’t any new homes in the area to buy- it makes it easier (in general) to sell an existing home.

And if more people can sell, and put some of that money back into the economy, that helps the seller and the economy. There is a case to be made on the side of the builders- that when builders are building they are employing people and paying wages, but the current unemployment rate is very low, at 4.8 percent. So these people are still finding work.


9 thoughts on “Drop in New Home Starts Helps Resale Market

  1. Raphael,

    Randy was referring to the housing starts report (the link was in my post) where it shows Phoenix has a ton of new homes being built, etc.

  2. This Blog post talks about how many new homes are built in different areas of the country, which is a relfection of how the real estate markets are going in those areas. I have a link that takes you to the report that I am talking about. In that link it shows different cities around the country and how many new homes are being started, or built, in those areas.
    Raymon left a comment saying he likes my blog.
    Randy Jones says that, based on the report, it looks like Dallas and it’s real estate market , might be in trouble, but Phoenix looks like it has a lot of new homes being built and might be in good shape.
    Raphael didn’t understand Randy’s comments.
    I explained Randys comments.
    MaryAnne doesn’t understand what is being discussed.
    I am now explaining again what is being discussed. What is being discussed is new home starts, which refers to how many new homes are being “started” or built.
    When the number of new homes being built goes down it helps Realtors and homeowners who are trying to sell already-built homes (or existing homes) because there is less competition from builders.
    Hope that helps,

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