Good News For Residential Construction

http://online.wsj.com/article/SB10000872396390444868204578062310255566972.html?mod=WSJ_hps_sections_news

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"The will to win is worthless if you do not have the will to prepare." (Thane Yost)
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According to the "experts," yesterday's strong housing report helped push the stock market mostly higher while weak reports from IBM and Intel were subtractions against the Dow.

There are many who believe that housing is the last key indicator that needs to climb if the GDP growth rate in the U.S. is to be sustainable. Since U.S. builders started construction on homes in September at the fastest rate since July 2008, this looks like good news.

Builders started work in September on new houses and apartments at a seasonally adjusted annual rate that is up 15% from August and 34.8% from September a year ago. The National Association of Home Builders estimates that each home built generates three full-time jobs and $90,000 in new tax revenue.

According to Michael Feroli, chief U.S. economist at J.P. Morgan Chase, a sustainable pace of home building should add up to two percentage points to gross domestic product. Between 2007 and 2011, more than 2.1 million construction workers lost their jobs and, since then, only 273,000 have been hired back. So, from an employment point of view, that "sustainable pace" means a lot.

Some people think the pop in home building suggests a "divide" between consumers and industry in terms of how they look at a potential economic recovery. While businesses continue to hold back on big investments because of uncertainty surrounding the coming elections and changes in the tax code, consumers' attitudes are positive, pushing up spending on goods like new houses.

CoreLogic announced this month that the "shadow inventory" (the pending supply of homes that are delinquent or in foreclosure and could ultimately be listed for sale) fell to 2.3 million units in July, or a supply of 6.0 months, down 10.2% from a year earlier.

Let's hope the news continues to be good.