Tuesday, November 20, 2012

Overwhelming Evidence Housing is in Recovery Mode

    We've been continuing to see bullish housing numbers and we got more today:

     "U.S. builders started construction last month on the most homes and apartments since July 2008, more evidence that the housing recovery is gaining momentum."

      "The Commerce Department said Tuesday that builders broke ground on homes in October at a seasonally adjusted annual rate of 894,000. That's a 3.6 percent gain from September."

       "Single-family home construction dipped 0.2 percent to an annual rate of 594,000, down from a four-year high in the previous month. Apartment construction, which is more volatile from month to month, rose 10 percent to an annual rate of 285,000."

        "Applications for building permits, a sign of future construction, fell 2.7 percent to 866,000, after jumping 12 percent in September to a four-year high. Still, permit applications to build single-family homes rose to their highest level since July 2008."

     At this point there's no way to deny that the housing market is recovering.
     "The overwhelming trend here is a housing market that has clearly shifted into recovery mode," Robert Kavcic, an economist at BMO Capital Markets, said in a note to clients.

      The housing market is a very important part of any recovery and of course was the big cause of this Lesser Depression-that is actually greater in places like Greece and even Britain-who is now suffering on the level of the Great Depression. So the "Lesser" in Lesser Depression applies more to us than our counterparts in Britain and the Eurozone.

       The reason this recession has been so deep is the housing bust. Recessions driven by a housing market collapse are much deeper.

       On the other hand, a recovery in the housing market has an outsized impact in the recovery.

       "Though new homes represent less than 20 percent of the housing sales market, they have an outsize impact on the economy. Each home built creates an average of three jobs for a year and generates about $90,000 in tax revenue, according to data from the home builders group."

        While there were may reasons to oppose Mitt Romney winning the election, for me the most visceral reason was that he had hoped to promise 12 millioni jobs without explaining how he'd create them, figuring that the economy likely will be better no matter who's in office the last 4 years-thanks in no small part to the President putting the framework in place for recovery.

          Had Romney won he would have been able to take credit for a recovery that he had nothing to do with, robbing his predecessor or the credit he deserved. All the while of course, Romney had claimed absurdly that if Obama were re-elected we'd never see any improvement from the last 4 years.

          He also invoked the recovery of 1980, comparing apples to oranges as 1980 was not derived from a housing bust. Interestingly, though like Reagan, Obama did get helped some by a late economic recovery of some level in the last few months.

'         With the housing recovery we will see gains in the overall economy as time goes on. The country will definitely have a much better next 4 years than the past 4 with the right President at the helm.

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