may just be a data volatility issue. With homes under construction not rising, it is doubtful that the supply/ demand mismatch will be eliminated anytime soon. Those looking to buy a new
MARKETS AND FED POLICY IMPLICATIONS: >> The housing market may not be booming but it is clearly moving forward at a steady pace. New home sales in the third quarter were up solidly from the second quarter. While total housing
starts were off slightly in the third quarter, single-family construction was up a bit. That implies housing may be a wash in the GDP report. Since residential investment reduced growth by 0.30 percentage point, that is good news for growth. But the big problem is still the lack of inventory.
Builders are cautious and tend to do very little speculative construction. The number of homes under construction or completed that are for sale is rising but is way below what had typically been the case over the previous forty years. Part of that may be finance issues, but a lot is the unwillingness of developers to
take a lot of risk. As a consequence, buyers don’t have a lot to choose from. This report is not going to affect the thinking at the Fed or in the investor world. It really isn’t a change from the pattern. And with the election less than two weeks from now, it makes a lot of sense for everyone, be they monetary policymakers or investors, to sit back and watch.
Joel L. Naroff is president and chief economist of Naroff Economic Advisors. He can be reached at 215-497-9050 or joel@ naroffeconomics.com
On the Web: www. naroffeconomics.com