Housing Starts Make Its Largest Leap Since 2004

Housing Starts soared in June, thumping analyst expectations for the second straight month.

A “housing start” is a new home on which construction has started.  Last month’s jump in single-family starts is the largest one-month jump since 2004.

To Wall Street, June’s figures are the latest signal that the country’s housing markets may be on the mend.

For home sellers, however, the news may not be so rosy.  With more homes expected to come on the market, price competition among sellers could intensify and — all things equal — that would push sales prices lower.

So far in 2009, that hasn’t happened. 

As home supply has grown, it’s been met by off-setting buyer demand.  Spurred by low mortgage rates and an $8,000 first-time homebuyer tax credit, Americans appear to find today’s home buying conditions somewhat ideal. 

As a result, purchase activity has been strong and first-time home buyers now account for close to 30 percent of existing home sales.

Rising Housing Starts can be a double-edged sword.  It shows strength that builders are more optimistic about the economy, but too much optimism can lead to a glut of unsold homes and that could reverse the recovery’s momentum.