Real Estate Bubble Popping, Housing Starts and Building Permits Tumble


CNBC is reporting this morning that US Housing Starts declined in October 14.6% to the lowest level in 6 years, while building permits were down a whopping 6.29%. Guests on the network, James Wilson and Jan Hatzius (Goldman Sachs Economist), predicted that housing will be a drag on GDP in ’07. Hatzius attributed the problem to bloated inventories and weakening sales from the home builders. Wilson predicted that builders will start marking down prices significantly, and that the worst is yet to come in the housing market. “The bottom has not hit yet.” He predicted that the Fed will keep interest rates steady until summer, when they will likely start easing.

Bloomberg reports, “Builders broke ground on 1.486 million new homes at an annual rate, down 14.6 percent from September’s 1.74 million pace, the Commerce Department said today. Building permits dropped to a 1.535 million pace, a record ninth straight decline and the lowest since December 1997.”

For those looking to buy a home, this is nothing but good news. The irrational exuberance that has been plaguing our housing market has finally really started to dissipate. With builders quickly dropping prices on their new homes, and previously owned homes staying on market for longer and longer, it is finally starting to look like a buyers market once again. Don’t get too excited yet, though. With thousands, if not millions of people in homes they can’t afford thanks to risky loans, it looks like the market will only continue to decline until foreclosed homes have truly hit a feverish pace. We need to see everything balance out before we’re close to the bottom of this giant real estate bubble. Buyers will likely be rewarded if they can continue to show patience.

About Author

Joshua Dorkin

Joshua Dorkin (@jrdorkin, Google+) founded when he saw a need for free, trustworthy information about real estate investing online. Over the past 12 years, Josh has grown the site from self-funded hobby to full-time job and passion. Today, BiggerPockets brings together over 600,000 members, housing the world’s largest library of real estate content, iTunes’ #1 real estate podcast, and an array of analysis tools, all geared toward helping users succeed.

1 Comment

  1. San Diego Lasik Doctor on

    Interesting post, the San Diego real estate markets decline may actually cause an induced real estate recession not only in San Diego but in other hot markets of the recent past.

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