The Good News Is Building Permits Are Down
February 20th, 2008 Categories: Real Estate Market Trends
How do you like my headline? Different, isn’t it?
The government released some key economic data today including housing starts and building permits issued for January. Building permits issued nationwide were 3% lower in January. Good!
As I looked at various news sources this morning most of the headlines made reference to the continuing decline of the national housing market and how building permits were at a 16 year low. I, of course 
decided to look at this news a little differently.
Let’s see, the basic economic problem with the national real estate market seems to be too much inventory. You could say there are too few buyers, and you would be right. However, the lack of buyers can be mitigated by a corresponding decrease in inventory. Remember that supply and demand lesson in economics class in college?
If builders are requesting fewer building permits, that can only help the current national housing market. If supply can be brought closer to equilibrium with demand, prices will stabilize.
Now this position assumes that falling home prices is the problem that needs correcting. But what if you are a buyer? Then falling home prices and lots of inventory are good things, right? Now if you could just figure out a way to buy a home without selling the one you already own.
The reality is, on a local basis, that the direction of prices only really matters if you are buying your first home, or selling your last one. If you get less than you might want to when selling your home, and then buy another one at less than you would have expected to pay a year or two ago, then you have done well. This applies to any of you who are selling in a declining market and buying another home in the same place.
The smaller group of people, who in a way are trapped, are those who must sell a home in a declining market and buy another home in an appreciating market. Even this is only a real problem for anyone who purchased a home during the past 1-2 years in one of the declining markets around the country.
If you are in the greater Raleigh area and need to move locally, then none of this really matters. There are things we can do together to get your home sold in a reasonable time at a very good price. And your next home should continue to appreciate at our steady and dependable rate of 3-5% per year. You won’t miss a beat.
The bottom line is that free markets are a beautiful thing. There are areas of the country where prices increased way ahead of affordability and the free market is correcting those prices. A reduction in building permits is a normal and expected part of this process.
