Former Fed Chairman Alan Greenspan, speaking last November, predicted that the worst of the housing market’s correction had passed. But judging that commentary by housing starts suggests otherwise.
The government this morning advised that the seasonally adjusted annual rate of housing starts for May dropped 2% from April. Compared to last November, starts are off nearly 6%. Looking at the data on an annual basis reveals that housing starts are almost one-quarter lower compared to a year earlier.
One might point out that the low point for starts arrived this past January, as our chart below shows. But the trend since, although technically improved since that trough, has yet to inspire confidence that a genuine recovery has arrived.
It should also be noted that while housing’s future trend remains a question, the larger economy has yet to suffer an associated shock of any great magnitude. Although no one will confuse June 2007 with June 2006, optimism is still the easier sell. But make no mistake: there’s still reason to worry that housing’s ills aren’t over and that the virus may grow bigger as a negative for the larger economy.