I don’t get it. I’m not going to complain by any means, but I don’t quite understand how the new home construction projections surged up 22% from January. Steven Bernard of the Associated Press reported this morning that, “The Commerce Department said new home construction rose to an annual rate of 583,000 in February from a revised 477,000 in January. Economists forecast construction would drop to a pace of around 450,000 units, according to Thomson Reuters. Building permits, a key measure of future activity, also rose unexpectedly.” Economists were predicting a 6% decrease, and suddenly there’s a 22% increase in projections? What gives?
Jeff Bater and Brian Blackstone of the Wall Street Journal may not have offered any explanation on the projection, but they did address my question/concern: “…some are wary a rebound in home construction will only add to the glut of inventories, particularly, new homes at higher prices-an especially tough sell in this market.” Yes gentlemen, I’m wary. Chew on these stats that they went on to rattle off: “Sales of new homes have fallen for six consecutive months through January and are down nearly 50% from January 2008, while inventories have ballooned to a supply of 13.3 months, which is driving prices lower and holding off would-be buyers.” And so I’ll pose the question again…what on earth made the projections of home construction rise 22% from last month? I feel like the Commerce Department is just playing with our emotions to build some confidence. Well, confidence with a healthy dose of skepticism…but as of today, it seems to be working.