Housing Data Improves, Long Road Ahead

http://www.forbes.com/2010/02/17/housing-starts-increase-markets-equities-indicator-update.html

Economic Terms:

1. Housing Start – the nationwide number of such instances per period used esp. in the U.S. as an indication of economic growth or decline
2. Department of Commerce – the department of the U.S. federal government that promotes and administers domestic and foreign commerce. It works to promote American business interests at home and abroad.
3. Housing Market – The U.S. housing market includes the construction, sale, and resale, of all residential properties across the country. Even though it's only focused on housing, conditions in the housing market are indicative of the state of the economy as a whole.
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People Mentioned:
David Joy - the chief market strategist and chairman of the Capital Markets Committee for RiverSource Investments, a subsidiary of Ameriprise Financial, Inc. Joy serves as chairman of the RiverSource Investments Capital Markets Committee, which comprises the company's senior investment and economic leadership.

The economic activity describes in this article emphasizes the slow and steady breakthrough of the economic recession. This article explains how the housing industry is beginning to thrive again, as statistically analyzed by the number of housing starts in January. This is said to be one indication that the economy is slowly starting to strengthen again. There seems to be a direct correlation between the number of housing starts and the economy. More people are buying houses right now and are being encouraged to buy houses with the assumption that they will be able to keep their jobs to pay for them. David Joy expresses that although there has not yet been a phenomenal breakthrough, economic improvement is perceived as being modest right now and that people are becoming more comfortable and confident spending their money. Housing starts hit their highest number reached since six months ago. However, there has been a decline in the demand for new home builds due to the excess amount of inventory spread throughout the United States. Also, the Department of Commerce explained that these housing starts were up 2.8% in January to a seasonally adjusted 591,000 units.

This is happening because plummeting prices and cheaper mortgage rates lured some buyers. Another reason this activity is occurring is due to all the governmental actions of injecting capital into the credit system and the tremendous incentives given by the government. These incentives are helping and are predicted to continue helping all homeowners, stabilizing the banking system, and stabilizing the huge amounts of capital being injected into the credit system are all other reasons as to why the housing market and housing starts statistics are improving. In addition, there are historically low interest rates of houses right now for people wishing to buy a home for their first time or those wishing to buy a new home.
In essence, this economic activity is occurring because of the low interest rates on houses right resulting from the economic crisis of recession the United States is currently suffering from. Real estate is one of those things that are commonly impacted by fluctuating interest rates. Interest rates are the cost of borrowing money. When interest rates are high, this typically creates debt and/or unpaid bills for the homeowner. However, when these rates are low, like they are now, there are fewer bills to pay with lower balances due. So, this prompts people to buy houses when interest rates are relatively low. Another reason stems from governmental activity and the incentives or rewards given by the government. These rewards are beneficial to consumers, the public and banking systems and credit systems, or systems for allowing people to purchase things on credit. They include, lower mortgage and interest rates, cheaper prices for nicer homes, bonuses for first time home buyers and many more.

As an economic commentator, I think next, the economy will progress and strengthen, and the housing starts statistics will continue to increase. Also, I agree with the analysis that the rise in the number of housing starts is an indication of a slowly recovering economy. I hold this belief because I do see other areas that are slowly improving and can be a direct correlation to the economic growth we are starting to see. Also, I believe the housing starts number will continue to increase because things seem to have already gotten worse before they could get better, and I believe that now is the time that things will start to get better.