April 19, 2011

Housing Starts: Good, But Not Great

Construction of homes and apartments jumped to a seasonally adjusted annual rate of 549,000 on Tuesday. While this is good news compared to earlier this year, it is not as positive in context of pre-recession levels, says Anthony Sanders, Mercatus Center scholar and real estate finance professor at George Mason University. He says the current lack of credit available for mortgages is important to consider in reviewing the housing market.

“Another essential part of this story is the lack of available credit in the housing market, meaning a lot of the population is no longer eligible for mortgage financing,” Sanders said. “Government has 95 percent of the market share and has decided to tighten credit. We might see anywhere up to 50 percent of households not being able to access credit, pushing people into rental housing.”

“Millions all over the country, especially in Florida, California, Arizona, and Nevada, are still going through foreclosures. This means a lot of impaired credit and the new policy is to brush aside those who have had their credit damaged. Government should not be deciding who does and does not deserve credit – that should be up to the individual lender,” Sanders said.