Housing Starts and Other Related Thoughts

According to nationwide data maintained by the Federal Reserve at http://research.stlouisfed.org/fred2/series/HOUSTS/downloaddata?cid=97, housing starts are still down from their high of almost 1.2 million units in Q1 of 2006. In fact, in Q2 of 2009 the seasonally adjusted housing starts were at approximatley 225,000 units, or a decrease of approximatley 80% over that period. Note that the most recent numbers are trending upward, however, which suggests the rate of decline is slowing from past levels. While its not time to start the party yet, there may be some room for optimism. People tend not to make long-term financial committments if they are not reasonably sure they can meet them timely.

Congruent with this, the same source (http://research.stlouisfed.org/fred2/series/TDSP/downloaddata?cid=97) shows that Household Debt Service Payments as a Percent of Disposable Personal Income peaked at about 14.5% in Octpber of 2006 and has been flat or decreasing since that time. Data for Q4 2008 (the latest available) show that the current ratio is approximately 13.5%, or a decrease of 5.26% over the time period.

The two metrics are not supposed to be parallel. However, the fact that we are willing to spend less of our disposable income on housing is one reason for housing starts to drop.

I don't know if this information is going to help you be a better real estate appraiser, but it will give you something to bore your non-appraiser friends with when you go to the gym.