Home construction up for 5th month in a row

There are recent news that continue to show improvements in the current housing market. Based on the reports issued by the government last week, the economy got a boost as more home buyers are walking into model houses and signing contracts. Furthermore, builders are hiring workers to address the expected demand for new homes. This is in turn helping with the employment situation in the United States. US builders in July broke ground on homes at the fastest pace when compared to the last eight months. This is a sign the housing market is healing as the economic contraction eases. Housing starts rose 2.7 percent to an annual rate of 598,000, the third straight increase, according to the median forecast of 69 economists in a Bloomberg News survey.

Construction of single-family homes increased in July 2009 for the fifth month in a row, as reported by government agencies. Building permits climbed nearly 6 percent. This increase in the construction of new homes, is expected to assist in the improvement in the economy in the last two quarters of this year and potentially create the needed boost in the housing market in 2010. There are a couple of factors that we must take a look at in the next two quarters of 2009. One of them is the unemployment rate, which is now 9.4 percent. Based on economists reports it is expected that this rate will surpass 10 percent. The concern here is that as the unemployment rate continues to hover the 10 percent rate, more homeowners will be unable to pay their mortgages. Another aspect to watch for is interest rates which are still near historic lows but could rise, making homes less affordable. Lastly, foreclosures which are still at record highs and maintaining the housing inventory levels high.

The current foreclosure rate and the increase in the new construction, could put some pressure in the recovery of the housing market by overflowing the market with inventory and keeping prices low as the supply continues to grow. We need to have a massive plan for the acquisition of the foreclosed homes, rehabbed them and place them back to the market at affordable prices coupled with the first time home buyer credit and low interest rates, incentivize home buyers in absorbing the existing inventory, which will allow the new construction to be absorbed by the home buyers that are prepared to upgrade in their housing needs.

We are seeing positive signs in the housing market in the first 7 months of 2009. We need to make sure that the government continues to monitor the foreclosure, interest, and unemployment rates. These aspects of the economy have a direct impact on the housing market current prices and future valuation.Considering that we are working ourselves out of the worst recession, since the great depression we must continue focusing on the positive signs that are being reflect in our recovery period. We must be realistic in our expectations of the recovery and set realistic goals in the process. The recovery wont happen overnight. However, if history has taught us something is that after every bust, there is a recovery and we are seeing the light at the end of the tunnel.