Start The House Party

Or stop the housing starts party, as the case may be.

New U.S. housing starts in October unexpectedly fell to their lowest level in six months, weighed down by a sharp decline in construction activity for both single-family and multi-family dwellings, a government report showed on Wednesday.

The Commerce Department said housing starts dropped 10.6 percent to a seasonally adjusted annual rate of 529,000 units, the lowest level since April and the percentage drop was the biggest since January. Analysts polled by Reuters had expected housing starts to rise to 600,000 units. September's housing starts were revised upwards to 592,000 units from the previously reported 590,000 units.

There's that term again: "unexpectedly fell".  Anyone who's been paying attention to this blog or any of the far better econ blogs out there that I link to should most certainly be expecting housing starts to fall sharply these days.  Housing prices continue to plummet.  We're in a catch-22: the housing depression won't abate until unemployment does, and the unemployment picture continues to be affected by the decreased spending power of the American consumer due to the housing depression.

So yes, with a glut of homes on the market, why do people keep expecting housing starts to increase in the middle of a broad housing depression?

If we're putting half a million new homes on the market every month here, and people aren't buying the full additional supply (mortgage applications are at a 12-year low despite low, low rates) well then gosh, what's going to happen when you have an oversupply of a product on the market and decreasing demand for that product?

Could it be a continuing plunge in home values?  That's basic macroeconomics 101 right there, kids.  I can figure it out and I haven't had an econ class since the Clinton years.