Home construction leaped up 17.2 percent between April and May, largely because of a burst in the multifamily sector. (Details in my next biweekly newsletter.)
Don’t start celebrating.
For one thing, one or two months hardly amounts to a trend. As one economist quoted by Dow-Jones has said, the U.S. housing market is, at best, crawling along the bottom. Second, seasonal increases invariably occur. Third, the federal government’s $8,000 tax credit–directly off the amount of tax that must be paid–has spurred a sense of cautious optimism on the part of builders.
And these are not the only issues lurking behind the statistics.
The elephant in the nation’s room is inventory. There are four or five more months of supply in the country than what is considered a balanced amount of housing between buyers and sellers. With staggering levels of unemployment and consumer confidence in the pits, what makes the builders think that there will be enough buyers out there to absorb the new inventory?
Adding more inventory hardly gives cause for even one cheer, let alone three cheers. I can’t imagine that builders aren’t shooting themselves in the foot and potentially torpedoing hopes for a housing recovery.
Licensed Associate Real Estate Broker
Senior Vice President
Charles Rutenberg Realty
127 E. 56th Street
New York, NY 10022