Green Shoots: Housing Starts

http://www.blogger.com/post-create.g?blogID=3084755449310886892

If we look at the graph Krugman has posted today on "Housing Starts" (blog attached), we see an excellent pictorial definition of how little a 17% improvement over last month is. His point, and here I agree, is that we can't even begin to see, from how far down we are, any kind of positive trend forming yet. If we correlate the lower actual number of housing starts now with the massive inventory of homes already built, we probably have 2 years' supply out there that needs to be substantially reduced before that market comes back. One could make the case that we don't need "housing starts". What we need is to sell off our housing inventory overhang. Foreclosure, while a sad thing, makes it possible for a single mom policewoman in Florida to buy her first house because she can get a $275,000 house for $75,000.

So, those folks who are seeing "green shoots" in the "data" and want us to back off fiscal stimulus (especially since we have too much money chasing too few goods: see previous post on Laffer) because potential "hyperinflation" could destroy us all, probably ought to look at current unemployment rates and sales of previously owned homes before they conclude that we need to stop pumping money into the economy.

Paranthetically, in another exercise in small numbers and how meaningful they are, I am very pleased to see a 900% increase in "Followers" for this site in the 24 hours since it was formally announced. And, I realize that people can stop in and read without becoming a follower so we have several more folks who are interested. So, I will continue...and I would like to thank those of you who have expressed your enthusiasm for what we're doing here.