Housing starts in March were 549,000, up from February and better than the Bloomberg survey expectations. Single family homes were 422,000, also up from February. But the big picture is still no real progress. Starts peaked at the beginning of 2006 at an incredible 2.2 million, slide though the end of 2008 to about 500-600 thousand and have sat there ever since. The received wisdom (meaning I’m not sure where the number comes from but everyone seems to cite it) says that we need about a million new homes built each year to keep pace with family formation, people moving to new neighborhoods, disaster recovery and such. Add to that the months supply numbers from the National Association of Realtors which tend to stay between 4 in strong markets and 11 in weak markets. If all this is roughly correct, at some point we should be running out of houses. Given continuing weakness in prices, we’re not there yet.
More seriously, while the economy is improving, the gains are not enough to convince home builders it is time to ramp up investment and construction. The missing links are stable home prices, lower unemployment and improving consumer confidence.