Good Economic News .... At Least for this Week

Housing starts increased substantially last month. Home sales also increased, substantially. Behind each were extremely (artificially?) low interest rates. The Obama administration has worked very hard to get and keep rates low in order to spur on a rebound in the real estate markets.

A few points to be aware of:

1. "...home builders are likely to be wary of breaking ground on new projects. Credit markets remain tight for construction loans, and potential buyers are still wary about losing their jobs or further declines in home values." (Italics added for emphasis; from NY Times, 6/16/09.) These are two extremely important drivers in the real estate market. Lenders continue to be rigorous in loan approvals. The money is not as easy to come by as it was last year. The overall pessimism is still there. People are very concerned about their job security and how to make ends meet.
2. "Rates are high." Now, let's put that in perspective - rates are higher than they were a few weeks ago (4.875% for 30 year fixed.) Last week, rates jumped 20% to 5.75% and 5.9% when the government bond rates surged. today's buyer is skeptical of the list price of a home and seeks affordability. A new conservatism has worked its way into our collective psyche. We want to have money set aside for the unexpected; we no longer look to our homes as back up emergency funds or ATMs. Buyers are behaving quite rationally and exerting greater scrutiny on how every dollar is spent.

The housing starts is good news. Even the interest rate news is good, too. We saw a number of homes go under contract, several in multiple offers. There seems to be more people who have sold their last home and now need to buy their next. Maybe, just maybe, we are seeing the beginning of the housing recovery on the North Shore.