# Housing Starts in the US



## Stan 101 (26 October 2007)

I had an interesting conversation recently with the national sales manager of US nail plate manufacturer. Nailplates are the little things that hold timber together for roof, floor and wall structures.
Sales have dropped 70% in Florida over the last 12 months. New equipment for the roof truss industry in the southern "sun" belt have also dropped considerably. Track housing on the west coast have also slowed in a significant way.

The lack of sales had been noticed before the whole "low doc" issue raised it's head in the US...It will be interesting to see the sales results for next couple of quarters. 




Regards,


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## krisbarry (26 October 2007)

According to the channel 2 finance program within the nightly news service last night, US home building tradies could take the next 10 months off work.  Talk about over supply of homes.  

God I wish I lived in America right now.

Australia paints a very different story, severe under supply, and everyone has a view about how to fix it and who caused the problem.  BUT no-one is owning up to the crisis, or taking responsibilty to fix it. Just plenty of buck-passing and hand-balling, and its not my problem, well it is....its everyones problem!

Even the tax payer who pays hard earned taxes to the system, then raises rents, which in turn raises the CPI, and when the CPI rises, then welfare payments rise and so does rent-assistance.  Centrelink then pays out more benefits, thus leading to higher taxes to cover the higher welfare payments and so the merry goes round.  The cycle begins again!


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## tech/a (26 October 2007)

Like everything in the US has to be BIG

When in Florida in 003 and having an interest in housing,I noticed how they do things.

One massive difference is a building Company ---and they are MASSIVE.
will have a whole subdivision of say 500 homes.
They will build ALL the homes at once then release the whole subdivision for sale.
You go virtually supermarket shopping for a house.
Most sold within weeks of completion.
Instant suburb.

Builders would start in 2002 with house prices at say $200K and sell in 2003 at $250K. Due to capital appreciation.


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## dhukka (26 October 2007)

Did anyone say Housing starts?


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## wayneL (26 October 2007)

dhukka said:


> Did anyone say Housing starts?



Nice trick they played last night... revise last months figures sharply downward so that this months look better. Do they think we are ^%$#ing stupid? (Well, I think many actually fell for it).

Hilariously, Bubblevision is calling the bottom in housing.


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## Ken (26 October 2007)

QUESTION?

how is this going to effect the following Australian companies in the next 3-5 years.

All this stocks are wel off there highs and probly fallen by 20-30%

Boral 
James HArdie
CSR

Are they cheap at current prices or still more to fall??


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## robots (26 October 2007)

hello,

those companies are diversifing in the building materials sector, at least in the AUS market, not sure in the US market

buying smaller private companies which may integrate well

for instance CSR's purchase of a couple of glass companies to integrate into "energy efficient" products category

boral making "different" type of retaining wall sysytem's, blocks etc

thankyou

robots


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## dhukka (26 October 2007)

wayneL said:


> Nice trick they played last night... revise last months figures sharply downward so that this months look better. Do they think we are ^%$#ing stupid? (Well, I think many actually fell for it).
> 
> Hilariously, Bubblevision is calling the bottom in housing.




Not only was August revised down but June and July were also revised down substantially. That essentially covers the whole summer season. September will almost certainly be revised lower and remember New Home Sales don't take into account cancellations which are at record highs. 

Not to mention that the standard error is + 10%. It's all here if interested


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## wayneL (26 October 2007)

Ken said:


> QUESTION?
> 
> how is this going to effect the following Australian companies in the next 3-5 years.
> 
> ...



Overseas property markets are looking absolutely dreadful... and it has only just started.

Over the next 3-5 years a lot of things may or may not play out.

*Credit crunch phase II leading to a longer term contraction in credit.
*Recession
*Peak Oil (which will severely affect car dependent suburbia)

We have just completed a massive credit expansion/real estate/building bubble which may be in for a hard landing.

IMO there is a way to go before this downside plays out.

****with all the usual disclaimers, etc.


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## KIWIKARLOS (26 October 2007)

that graph of housing starts , completions and recessions is not indicative of anything. Never before has the housing industry caused a recession its always been the recession causing the downturn in housing construction.

This is a whole new ball game now.


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## CanOz (26 October 2007)

That is just an awesome chart Dhukka. Can you pm that to me? I think i'll put it up in my office for all the stupid capitalist pigs that wander in now and then to argue about the economy with me.

I wonder what would have happened if after Sept.11th, the US just let the markets lead the recovery instead of interferring so much?

Cheers,


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## Ken (26 October 2007)

does anyone have figures on population forecast for the year 2010+ 2020+ 2030+ is the population growing or decreasing?

surely they must be taken into the bigger pciture. The US is reported to have this housing slump. But really is this only due to the massive rise in house prices over the last 10 years?  Isn't this just a normal correction like the stock market has?

If people are living longer world wide  does the population increase. Houses will have to be built. If theres a 2% increase in population world wide in the next 15-20 years, houses are going to be built.

I am sceptical about the US housing market and the way its being reported. The media loves to pick something up and run with it. The figures are there, but is it really as scary as they are making out.

House prices cant keep going up. so maybe people have just over-payed for houses, cant afford to repay them, so they are selling. The market will aborb these houses over time you would think.


This will happen in australia one day, where houses keep going up, and people cant afford to make repayments.


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## KIWIKARLOS (26 October 2007)

also i would rather be in the oz situation now of having greater demand than supply in this environment. Also this stuff about peak oil been now is not true.

It may be peak oil for conventional crude but there is literally trillions of barrens of oil still in the ground by way of oil sands and oil shales. These have to be mined and require alot more processing but shell has said that if oil hits above $100 US then these supplys become economic, and once they start production and invest the capital the cost can feasably decrease to equivalent of <$50 per barrel. 

Coincidently 90% of the worlds oil sands are located in Canada and Venezuala, Canada already ships about 800K barrels a day of this stuff to the US. There is enough hydrocarbons in the world to keep us going for hundreds of years. Not to mention the fact you can convert coal to diesel and the cost is about $100-120 per barrel equiv. Wyoming has enough coal for 50 years of diesel production and australia 100+

Check it out.

http://en.wikipedia.org/wiki/Oil_sands


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## wayneL (26 October 2007)

KIWIKARLOS said:


> that graph of housing starts , completions and recessions is not indicative of anything. Never before has the housing industry caused a recession its always been the recession causing the downturn in housing construction.
> 
> This is a whole new ball game now.



That is merely a statement without any substantiating logic. More information to support your analysis please.


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## KIWIKARLOS (26 October 2007)

fact is housing downturn is a product of a recession not a cause like it is now thats why the US thinks it can weather this storm because housing has NEVER caused a recession before.


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## KIWIKARLOS (26 October 2007)

if you graphed any economic activity compared to the recessions in the last 50 years they would all co-incidently go down as well


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## wayneL (26 October 2007)

KIWIKARLOS said:


> also i would rather be in the oz situation now of having greater demand than supply in this environment. Also this stuff about peak oil been now is not true.
> 
> It may be peak oil for conventional crude but there is literally trillions of barrens of oil still in the ground by way of oil sands and oil shales. These have to be mined and require alot more processing but shell has said that if oil hits above $100 US then these supplys become economic, and once they start production and invest the capital the cost can feasably decrease to equivalent of <$50 per barrel.
> 
> ...




That's probably true. What we have is peak "easy to extract and refine" oil. The use of tar sands as the main supply etc will however, still lead to much higher prices.


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## wayneL (26 October 2007)

KIWIKARLOS said:


> fact is housing downturn is a product of a recession not a cause like it is now thats why the US thinks it can weather this storm because housing has NEVER caused a recession before.



The economy has never been so dependent, indirectly and directly, on house price appreciation before either. As you say, a whole 'nuther bowl of wax.


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## KIWIKARLOS (26 October 2007)

agreed but even if oil was to be $200 dollars a barrel from using things like ta sands we could definitly inprove the efficiency of current vehicles by 50% with use of Hybrid technology and compostie materials, although the cars then would be more expensive to produce. Perhapes each family would have one car instead of one per person :


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## wayneL (26 October 2007)

KIWIKARLOS said:


> agreed but even if oil was to be $200 dollars a barrel from using things like ta sands we could definitly inprove the efficiency of current vehicles by 50% with use of Hybrid technology and compostie materials, although the cars then would be more expensive to produce. Perhapes each family would have one car instead of one per person :



Agreed! 

A lot of rationalizing can be done with regard to oil usage. It is criminal how much we waste at the moment.


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## KIWIKARLOS (26 October 2007)

yeah how bad would you feel if you bought a house for $200K then it went up $100K so you used the equity to go buy consumer goods only to find your house really is only worth $200 K or less 

I think you would have to be pretty sily to use home equity to buy consumer goods, one things for sure the US conumer 70% of their economy is not going to be able to afford to keep the economy chugging along. They must be kidding if they think a recession isn't coming 

The only way i can see out of this one would be for the US to adopt slavery again or use its military to just take what it wants / needs. (Iraq )


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## KIWIKARLOS (26 October 2007)

in regards to oil wastage i would have to say the funniest thing i've seen is people doing paper routes in cars throwing hte papers out the window in plastic sleeves !  I mean come on what ever happened to the paper boy !


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## robots (26 October 2007)

KIWIKARLOS said:


> yeah how bad would you feel if you bought a house for $200K then it went up $100K so you used the equity to go buy consumer goods only to find your house really is only worth $200 K or less
> 
> I think you would have to be pretty sily to use home equity to buy consumer goods,




hello,

so you now have a 100k personal loan at the lowest possible rate, no different to somebody who gets a personal loan to buy consumer goods, car, holiday etc

plenty doing that everyday, everything is credit credit credit, not just housing owners,

cant see US being any different to AUS, as Ken has mentioned, houses will need to be built, at the moment supply maybe too high

thankyou

robots


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## dhukka (26 October 2007)

KIWIKARLOS said:


> that graph of housing starts , completions and recessions is not indicative of anything. Never before has the housing industry caused a recession its always been the recession causing the downturn in housing construction.
> 
> This is a whole new ball game now.




Kiwi,

I doubt anyone would argue that housing downturns cause recessions. However you will notice that housing has turned down noticeably before every recession since the late 1960's. Again that does not indicate housing caused the recession but it is a good leading indicator nonetheless. The downturn was less pronounced in the 2001 recession. That recession as we know was brought about by over-investment in tech related goods 

Now we have a huge over-investment in housing with commercial real estate set to follow. I would expect a US recession will probably come even later than usual given the biggest real estate bubble in history has further to unwind.


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## Smurf1976 (26 October 2007)

I don't want to turn this into another oil thread as the issue has been discussed elswhere in this forum. But to summarise... 

1. The tar sands in Canada are sufficient to run the world for about 4 years. 

2. Make that 6 years if nuclear power is used to extract the oil rather than burning some of the oil produced to fuel the process. Natural gas is in decline in Canada and is not a long term option despite its present usage for tar sands.

3. It would realistically take 50 years to mine the tar sands. That gives an annual production rate of 6.5 - 10 million barrels per day versus global consumption of about 85 million barrels per day increasing at 1.5 million barrels per day per year.

4. The logical conclusion from the above is that, at best, Canada's tar sands could delay peak oil by about 6.5 years if production elsewhere did not actually decline, but merely plateaued.

5. If we assume a 3% decline rate for conventional production post peak as seems more realistic than a permanent plateau, that means tar sands can only delay the peak by 2 to 3 years. 

6. But it would realistically take far longer than 2 or even 6.5 years to fully develop the resource. 

7. Tar sands can thus at best slow the decline but can not reverse it.

8. A recent change to tax arrangements in Alberta has, according to some reports, made oil sands unprofitable at present prices. I'm not certain as to the details but if that's true then $90 is going to look cheap real soon as oil sands development grinds to a halt until prices rise to make it profitable again.

Venezuela.

The natural bitumen in Venezuela represents a bit under a decade's worth of global oil supply at present global production rates. But being heavy oil, it would take far longer than that to extract it.

Also, there are essentially no refineries in the world able to process the oil unless it is upgraded first.

But upgrade the oil and the volume goes down.

Overall, it's another thing that can help but can't actually reverse the situation on a long term basis.

But due to political problems, Venezuela's resources are effectively of very limited use to the Western world under present conditions. Only if there's a political revolution in Venezuela does it become worthwhile even thinking about their resources being available. At present, the stuff might as well not be there at all.

As for all the other unconventional "oil" sources, they were going to be economic at $40 per barrel. Then it was $50. Then it was $60. Then it was $80. Now it's $100 and still rising. 

The reason is simple. The higher the cost of crude oil, the higher the cost of energy to make the alternatives work given their low EROEI.

It's like saying that robots will be cheaper than humans if wages double whilst failing to mention that a doubling of wages also greatly increases the cost of building the robots. End result is wages need to go up probably 10 fold before the robots actually make financial sense. 

Much the same with all these energy-intensive oil substitutes. They'll work but you need to factor in using the energy produced as the basis for the financial cost of energy used for the project itself rather than basing the calculations on today's cheaper energy. Trouble is, do that and the results are rather frightening. But also rather accurate.

Oil we will have. But not at a price that gives a normal person reason to query any performance aspect of their vehicle other than fuel consumption and how to minimise it.


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## KIWIKARLOS (27 October 2007)

thats correct energy prices will increase my point is that this increase can be offset with efficiency gains and new technology. A cheap car will be expensive to run and an expensive car will be cheap to run. Also public transport can improve greatly and fact is by 2020 we will be ready to start implimenting a hdrogen fuel economy. Right now there are many many been looked into hydrogen production without using huge amounts of electricity. One for example is an algae that uses photosynthesis to produce hydrogen. My point is peak oil is not going to be a problem because there is a solution and as you say we can use these alternatives to give us breathing room in between.


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## KIWIKARLOS (27 October 2007)

Dhukka no offence mate but that garbage about housing causing recessions in the past is BS! housing alone has only ever caused one recession and that was the japanese recession that was caused by the housing bubble burst. 

It is a consequence of a recession that housing activity like all economic activity in the country effected goes down.

Panic of 1819 (1819 - 1824), the first major financial crisis in the United States. 
Panic of 1837 (1837 - 1843), a sharp downturn in the American economy caused by bank failures and lack of confidence in the paper currency 
Panic of 1857 (1857 - 1860), failure of the Ohio Life Insurance and Trust Co. bursts a European speculative bubble in U.S. railroads and loss of confidence in U.S. banks 
Panic of 1873 (1873 - 1879), economic problems in Europe prompt the failure of Jay Cooke & Company, the largest bank in the U.S., bursting the post-Civil War speculative bubble 
Long Depression (1873 - 1896), begins with the collapse of the Vienna Stock Exchange and spreads throughout the world. Some historians do not believe it is actually one large recession. It is important to note that during this period the global industrial production greatly increased. In the US for example, industrial output increased 4 times. 
Panic of 1893 (1893 - 1896), failure of the U.S. Reading Railroad and withdrawal of European investment leads to a stock market and banking collapse 
Panic of 1907 (1907 - 1908), begins with a run on Knickerbocker Trust Company stock October 22nd 1907 sets events in motion that will lead to a depression in the United States. 
Post-WWI recession - marked by severe hyperinflation in Europe over production in North America. Very sharp, but also brief. 
Great Depression (1929 to late 1930s), stock market crash, banking collapse in the United States sparks a global downturn, including a second but not heavy downturn in the U.S., the Recession of 1937. 
Post-Korean War Recession (1953 - 1954) - The Recession of 1953 was a demand-driven recession due to poor government policies and high interest rates. 
1973 oil crisis - a quadrupling of oil prices by OPEC coupled with high government spending due to the Vietnam War leads to stagflation in the United States. 
1979 energy crisis - 1979 until 1980, the Iranian Revolution sharply increases the price of oil 
Early 1980s recession - 1982 and 1983, caused by tight monetary policy in the U.S. to control inflation and sharp correction to overproduction of the previous decade which had been masked by inflation 
Great Commodities Depression - 1980 to 2000, general recession in commodity prices 
Late 1980s recession - 1988 to 1992, collapse of junk bonds and a sharp stock crash in the United States leads to a recession in much of the West 
Japanese recession - 1991 to present, collapse of a real estate bubble and more fundamental problems halts Japan's once astronomical growth 
Asian financial crisis - 1997, a collapse of the Thai currency inflicts damage on many of the economies of Asia 
Early 2000s recession - 2001 to 2003: the collapse of the Dot Com Bubble, September 11th attacks and accounting scandals contribute to a relatively mild contraction in the North American economy.


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## KIWIKARLOS (27 October 2007)

sorry but one thing to note is that the only recession ever caused by a housing bubble has been going for over 20 years 

right now OZ, england, europe and the US have housing bubbles 

That said though there are other factors effecting the japanese recession such as the fact that they are a tiny island and probably find rapid development very hard now


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## dhukka (27 October 2007)

KIWIKARLOS said:


> Dhukka no offence mate but that garbage about housing causing recessions in the past is BS! housing alone has only ever caused one recession and that was the japanese recession that was caused by the housing bubble burst.
> 
> It is a consequence of a recession that housing activity like all economic activity in the country effected goes down.
> 
> ...




Kiwi,

Did you actually read my post? I am NOT claiming that Housing downturns cause recessions. However Housing  downturns do lead recessions, that doesn't mean they cause them, but they are a good indicator of coming recessions.


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## wayneL (27 October 2007)

dhukka said:


> Kiwi,
> 
> Did you actually read my post? I am NOT claiming that Housing downturns cause recessions. However Housing  downturns do lead recessions, that doesn't mean they cause them, but they are a good indicator of coming recessions.




Also, economists like to give a single "cause" for a particular recession, so they can label it and pigeon-hole it to suit their favourite economic theory. 

However these "causes" may be nothing more than another symptom. I reckon, you could trace it all back to the expansion and contraction of credit, in most cases. The expansion of credit and inevitable malinvestment that follows will just manifest itself in different ways.

Credit contraction inevitably follows, but may just need a "catalyst" to tip it over the edge. But the root of any recession is still a credit bubble.


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## robots (27 October 2007)

wayneL said:


> Overseas property markets are looking absolutely dreadful... and it has only just started.
> 
> Over the next 3-5 years a lot of things may or may not play out.
> 
> ...



Hello,

maybe 1yr, 5yr or never to occur

credit crunch phase I came and went, its like people have an eternal flame for total destruction

why are people so jaded about current situation, please explain

thankyou

robots


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## wayneL (27 October 2007)

robots said:


> credit crunch phase I came *and went*,



No it didn't. It's still very much in play, there is just very little in the news about it. Talk to the credit market boys and poo is still flying off the propeller blades.

The public are just being treat like mushrooms.


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## YChromozome (27 October 2007)

Stan 101 said:


> Nailplates are the little things that hold timber together for roof, floor and wall structures. Sales have dropped 70% in Florida over the last 12 months.




I really [sincerely] feel sorry for all those magazine journalists that write for the property magazines that could loose their jobs. I was just in the news agent and there must be almost half a shelf full of them. I didn't check if they were offering discounts on five and ten year subscriptions.


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## robots (27 October 2007)

YChromozome said:


> I really [sincerely] feel sorry for all those magazine journalists that write for the property magazines *that could* loose their jobs. I was just in the news agent and there must be almost half a shelf full of them. I didn't check if they were offering discounts on five and ten year subscriptions.




hello,

the story so far

thankyou

robots


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## dhukka (27 October 2007)

wayneL said:


> Also, economists like to give a single "cause" for a particular recession, so they can label it and pigeon-hole it to suit their favourite economic theory.
> 
> However these "causes" may be nothing more than another symptom. I reckon, you could trace it all back to the expansion and contraction of credit, in most cases. The expansion of credit and inevitable malinvestment that follows will just manifest itself in different ways.
> 
> Credit contraction inevitably follows, but may just need a "catalyst" to tip it over the edge. But the root of any recession is still a credit bubble.




Absolutely, this time around subprime will probably get the blame. However subprime is just a symptom of a much bigger problem, which as you alluded to was the proliferation of cheap and easy credit.


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## beatthemarket (20 June 2012)

[h=1]Housing Starts Up 28.5% Annually[/h]Sophia Fain 9:26AM, June 19, 2012

Housing starts in May dropped 4.8% from April to a seasonally adjusted annual rate of 708,000. However, compared to May 2011, housing starts are up 28.5% for the month. Single-family housing starts in May gained 3.2% month-over-month to a rate of 516,000. The multi-family component dropped 24.2% m-o-m to a rate of 179,000.
Housing permits in May increased 7.9% from April to a seasonally adjusted annual rate of 780,000, up 25% from May 2011. The single-family permits gained 4% from the prior month at a rate of 494,000 along with authorizations of units in buildings with five units or more gaining 17.7% at a rate of 266,000 in May.
Housing completions in May were at an annual pace of 598,000, down 10.3% from April but 10.1% from May 2011. The single-family component dropped 6.3% in housing completions at a rate of 458,000. The multi-family component dropped 25.7% from April to a rate of 130,000 for housing completions in May.

Source: U.S. Census Bureau and the Department of Housing and Urban Development


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## challenger123 (26 June 2012)

beatthemarket said:


> [h=1]Housing Starts Up 28.5% Annually[/h]Sophia Fain 9:26AM, June 19, 2012
> 
> Housing starts in May dropped 4.8% from April to a seasonally adjusted annual rate of 708,000. However, compared to May 2011, housing starts are up 28.5% for the month. Single-family housing starts in May gained 3.2% month-over-month to a rate of 516,000. The multi-family component dropped 24.2% m-o-m to a rate of 179,000.
> Housing permits in May increased 7.9% from April to a seasonally adjusted annual rate of 780,000, up 25% from May 2011. The single-family permits gained 4% from the prior month at a rate of 494,000 along with authorizations of units in buildings with five units or more gaining 17.7% at a rate of 266,000 in May.
> ...





Completely agree! The US Economy may not be flying, but it is still growing by between 1-1.5% GDP.

Again, as economists we need to look at the economic indicators as we continue to invest in the ASX.

-----------------------------------------------------------------------------------------------------------
I Hold: IndoChine Mining {ASX:IDC}


Markets are still weak on the back of the EU summit which will be held this Thursday and Friday. 

Our future lies with China, in terms of our mineral prices and US in terms of stock market money flows. The EU will come out of this situation.

What is very interesting is the fact that US new home sales increase in May at the fastest pace in 2 years. This means Operation Twist1 which was activated in September 2011 worked exactly as Mr Bernanke had hoped. Bringing long term bond prices down by purchasing 30 year bonds, which is what 90%+ of US mortgages are lent against. These lower interest rates allowed home owners to renegotiate current loans into lower interest rate loans, giving them more disposable income to pay down credit cards, buy goods and service, and now also allow new  home owners to buy a new house at almost approximately 3-4% interest.

Housing construction is the largest service employer, plumbers, chippies, electricians, truck drivers, rely on new housing construction for work. In every recession this has been the sector to lift any Western Economy out of recession, this has been missing on a consistent basis in the US since the GFC. The figures for May show a strong turnaround, on top of that we have another $267Billion Operation Twist II which was just activated last week, which will stimulate the US economy's largest service employer into the second half of 2012 onwards.

Not only will this lead to stronger employment, but also stronger demand for construction materials to build these homes.

As monthly statistics begin to roll out that the world isnt falling into recession, coupled with govt and central bank action which is set to accelerate into 2012, we will see a rebound of current oversold levels in the ASX.  

http://www.bloomberg.com/news/2012-...in-u-s-increased-to-two-year-high-in-may.html 


*Home Sales Reach Two-Year High as U.S. Rates Fall: Economy*
By Lorraine Woellert - Jun 26, 2012 6:33 AM ET 
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Daniel Acker/Bloomberg 
New home construction in Elgin, Illinois. 
Demand for new U.S. homes rose more than forecast in May as mortgage rates dropped, bolstering the residential real-estate market while other parts of the world’s largest economy cool. 


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June 25 (Bloomberg) -- Demand for new U.S. homes rose more than forecast in May as mortgage rates dropped, bolstering the residential real-estate market while other parts of the world’s largest economy cool. Erik Schatzker reports on Bloomberg Television's "Market Makers." (Source: Bloomberg)
Enlarge image  
The deck of a Toll Brothers Inc. model home stands in Randolph, New Jersey. Falling borrowing costs and more affordable properties may keep luring buyers, even as a cooling job market and limited access to credit restrain the recovery. Photographer: Emile Wamsteker/Bloomberg 
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Purchases climbed to a 369,000 annual rate, the most since April 2010 and up 7.6 percent from the prior month, the Commerce Department reported today in Washington. The median estimate in a Bloomberg News survey of 67 economists was 347,000. The number of houses on the market held near a record low. 
Falling borrowing costs may keep luring buyers to builders like Toll Brothers Inc. (TOL), even as a cooling job market and limited access to credit restrain the recovery. The Federal Reserve last week extended a program to keep long-term interest rates low in a bid to reduce unemployment, sustain housing and prevent a global slowdown from stalling the expansion. 
“It’s another sign of life in the housing sector,” said Brian Jones, a senior U.S. economist for Societe Generale SA in New York, who forecast a gain to 362,000. “It’s consistent with a gradual improvement in activity, but we’ve got miles to go before we get back to normal.” 
Stocks dropped amid concern that a meeting of European leaders later this week will fail to help contain the region’s debt crisis. The Standard & Poor’s 500 Index dropped 1.6 percent to 1,313.72 at the 4 p.m. close in New York. The yield on the benchmark 10-year Treasury note fell to 1.60 percent from 1.68 percent late on June 22. 
BIS Report 
Elsewhere, the Basel, Switzerland-based Bank for International Settlements said in its annual report published yesterday that central banks in developed nations are confronting the limits of their ability to aid economic recovery as government efforts to strengthen finances fall short. 
Bloomberg survey estimates for U.S. new-home sales, which are counted when contracts are signed, ranged from 327,000 to 375,000. The April reading was unrevised at the previously estimated 343,000, while March and February were revised up. 
The median sales price increased 5.6 percent from the same month last year, to $234,500, today’s report showed. Prices have climbed on a 12-month basis since February, the best performance in five years. 
Purchases rose in two of four U.S. regions last month, led by a 37 percent jump in the Northeast, while the South climbed 13 percent. Demand dropped 11 percent in the Midwest and 3.5 percent in the West. 
Lean Supply 
The number of newly constructed houses on the market was at 145,000 compared with the record low of 144,000 reached in April and March. The record high of 572,000 was reached in July 2006. The supply of new houses on the market at the current sales pace dropped to 4.7 months, the lowest since October 2005, from 5 months in April. 
In response to improving demand, builders broke ground on 516,000 single-family houses last month at an annual pace, up 3.2 percent from April and the most this year, the Commerce Department reported last week. 
The Washington-based National Association of Home Builders/Wells Fargo sentiment index rose by 1 point this month to 29, the highest since May 2007, another report last week showed. 
Horsham, Pennsylvania-based Toll Brothers, the largest U.S. luxury-home builder, on May 23 reported second-quarter profit that beat estimates as orders jumped. 
Suppliers Benefit 
United Technologies Corp. (UTX) and Lennox International Inc. (LII), makers of heating and air conditioning units, are among companies benefitting from developers’ positive outlook. Lennox, based in Richardson, Texas, had a 40 percent increase in sales to new-home builders in the first quarter. United Technologies, in Hartford, Connecticut, forecasts about 700,000 housing starts this year, Chief Financial Officer Gregory Hayes said. 
“The expectation is we’re not going to see a huge recovery in the U.S. residential marketplace, but we should see a steady recovery,” Hayes said at a June 14 conference. “Residential is coming back, but it’s very, very slow.” 
The stabilization in housing has boosted builder shares this year. The Standard & Poor’s Supercomposite Homebuilder Index has climbed 33 percent this year through June 22, compared with a 6.2 percent gain for the broader S&P 500. 
Residential construction hasn’t contributed to economic growth over the course of an entire year since 2005, when it accounted for 0.4 percentage point of the 3.1 percent increase in gross domestic product. From 2006 through 2009, the homebuilding slump subtracted 0.8 percent point from growth on average. The declines diminished over the past two years. 
Shrinking Share 
Newly constructed houses made up 6.7 percent of the residential market last year, down from a high of 15 percent during the boom of the past decade. 
Sales of existing homes declined in May as fewer distressed properties reached the market, the National Association of Realtors reported last week. The decline in transactions involving foreclosures and short sales, where a lender agrees to accept less than the balance of the mortgage, helped push the median price of a previously owned house up 7.9 percent from the same time last year, the biggest 12-month gain since February 2006. 
Less competition from existing houses and even lower mortgage rates may keep spurring the market. The average rate on a 30-year fixed loan dropped to 3.66 percent last week, the lowest in data going back to 1972, according to Freddie Mac. 
The central bank last week aimed to keep borrowing costs low. Policy makers announced they will expand the Operation Twist program to extend the maturities of assets on its balance sheet. They said they stood ready to take further action to put unemployed Americans back to work. Fed officials also lowered their outlook for growth and employment. 
To contact the reporter on this story: Lorraine Woellert in Washington at lwoellert@bloomberg.net


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