Housing construction showing signs of recovery
Jeremy Hobson: We’ll start with some good news about the housing market. Groundbreaking on new homes jumped last month at the fastest pace in three years. Housing starts, as they’re called, were up 6.9 percent from May and 24 percent from a year ago.
Josh Brown of Fusion Analytics joins us live as he does every Wednesday. Hi, Josh.
Josh Brown: How’s it going?
Hobson: Going well. So is this more evidence of a rebound in housing?
Brown: Absolutely. You know it’s been really frustrating to watch the fits and starts over the last few years, but you know, this particular slew of data that we’ve gotten over the last three months, four months, really looks like solid progress for a seriour traction.
Hobson: And what’s the effect? I mean, this is just one part of economy, but what do you think?
Brown: The good news is its a really important part of the economy and where it really helps us in my view and in the view of most people that follow this type of data, is that the wealth of effect from house prices, not only stabilizing, but evenutally going up, is probably the most powerful driver of consumer confidence — of people feeling as though their situation is improving. This helps spending, this helps the whole economy. The wealth effect from housing is way more important than the stock market because this is people’s biggest financial asset, much more so than a 401-K now. So, Jeremy, I think it’s very key.
Hobson: And why is it finally happening? People have been trying to make the housing market to turn around for years now.
Brown: Yeah, well the dirty secret is you can help or hurt a little bit with policy, but in the end you really need time — especially for something where we had gotten so far away from the long term trend. What we really needed to do was correct that 80 percent of the way back to trend through price, meaning house prices dropping, and then that last 20 percent it looks like we are going to correct with time, meaning we’ll get back to long term trend just by sitting around here for a little while longer. And that’s, you know, what deleveraging and the business cycle is all about. The good news is we’ve done a lot of the hard work already.
Hobson: Josh Brown of Fusion Analytics, thanks as always.
Brown: Thank you.
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