Housing Starts Down 49% – This is Great News!

In September, Twin Cities home builders were issued 49% fewer permits for 48% fewer units.  This marks a substantial deceleration of the new construction market in the Twin Cities area.  This is excellent news for the local market!

Why am I so elated with what appears to be bad news?  While this does signal a significant slowdown for builders, this slowdown in activity will help moderate the increasing inventory in our market.

I’ve included a page from a recently published MAAR report which shows the months of housing supply currently on the market in the $250,001-$350,000 price range.  In all but the condominium market, new construction supply is dramatically higher than existing homes.  This exacerbates the stress of lower buyer activity, creating more pricing pressure on both the existing and new construction markets.

With the diminishing numbers of new housing starts, new construction inventory should slowly reduce over the next 6-9 months, which should bring supply down to more manageable levels.  This in turn will help stabilize pricing and bring back consumer confidence in the housing market.

Housing Supply September '06 $250k-$350k