Housing starts rose to their highest rate in more than four years in October, suggesting the housing market recovery was gaining steam, even though permits for future construction fell.
The Commerce Department said on Tuesday housing starts increased 3.6 percent to a seasonally adjusted annual rate of 894,000 units — the highest since July 2008.
The housing market has turned around after an unprecedented collapse that landed the economy in its worst recession since the Great Depression. The recovery, marked by rising home sales, prices and building activity is being driven by pent-up demand against the backdrop of record low mortgage rates.
A turnaround? Yes. But there is still a long way to go, as these two charts from JPMorgan make clear:
This is misleading, in no small part because there’s a lot of homes built still on the market that are in the shadow inventory.
After all, there was a huge housing bubble as we all know in the mid-2000s, so beginning the chart at the beginning of the housing bubble is a trick only a petty hack would use.
Second, as the shadow inventory is continually being whittled down, there isn’t as strong a need to build new houses before it’s entirely worked through, and that is still 2-3 years away.