A Message from Christopher J. Brown / November Housing Starts and Permits

A message from RE/MAX Connection CEO Christopher J. Brown:

As a small business owner and an elected public servant, I am calling on Congress to come together in the spirit of compromise, for the sake of our country’s economy, to get a deal in place to avoid the pending consequences of the fiscal cliff.

What we need is a combination of lower federal spending and higher revenue from moderate cuts in deductions and sensible tax increases for the highest-income earners. To make these cuts and increases more meaningful, though, we must take the revenues they produce and apply them toward reducing the federal budget deficit.

Middle-class families and entrepreneurial companies are the heart and soul and of our country’s economy. We cannot allow the detrimental effects of the fiscal cliff to rob families of disposable income and gut the operating budgets of small businesses. These are the economic engines that will grow our economy and we must not abandon them.

(NOTE: In addition to his role as RE/MAX Connection CEO, Christopher J. Brown also is a New Jersey state Assemblyman, serving portions of Burlington, Camden and Ocean counties.)

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Naroff Economic Advisors, Inc.

Joel L. Naroff
President and Chief Economist

INDICATOR: November Housing Starts and Permits

KEY DATA: Starts: -3%; 1-Family: -4.1%; Permits: +3.6%; 1-Family: -0.2%

IN A NUTSHELL: “The housing recovery continues as it is not unusual for construction activity to have some ups and downs.”

WHAT IT MEANS: The housing market is clearly on an upswing. The new construction activity decline in November was nothing to worry about. After an eighteen percent rise over the previous two months, it was hardly a surprise to see the level of starts moderate. Indeed, the October pace was the highest since July 2008. That the November decline was so small is a positive indication that construction activity continues unabated. Sandy slowed builders in the Northeast somewhat but it was a sharp cut back in the West that caused overall national housing starts to fall. Meanwhile, construction in the South and Midwest continued to increase. So far this year, housing starts are up over twenty seven percent compared to the same eleven month period in 2011. Importantly, the fourth quarter pace is thirteen percent above the third quarter rate and that means residential construction should add sharply to growth. Looking forward, housing permit requests continue to rise and the level supports some additional construction activity. Builders are not taking out permits and sitting on them as the number of units under construction is rising while the number authorized but not started has remained reasonably stable over the past few months.

MARKETS AND FED POLICY IMPLICATIONS: The expectation was that home construction would slow and it did. However, given how far and how fast building activity has accelerated over the past few months, the moderation was hardly a sign that housing market has hit a soft patch. There is really little reason to worry about the housing market especially given the continued rise in home builders’ attitudes. The National Association of Home Builders’ Confidence index rose for the eight consecutive month in December, to its highest level since April 2006. More construction also means that the sharp declines in construction payrolls that we saw in the November employment report should be reversed in December. The takeaway is that the housing market is indicating that the economy really is growing more strongly than is commonly believed. If households were really worried, they would not be buying new homes and developers would not be out there putting the shovels into the ground. As soon as we get an agreement on the fiscal cliff, watch for everyone to start saying the economy is ready to take off. Actually, lift off has already begun. The only problem has been Washington’s finger on the abort button. Once that is removed, we should be able to reach orbit.

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RE/MAX Connection Realtors is not a licensed financial advisor and is not providing any financial advice. You should consult with a licensed financial advisor prior to making any financial decisions. RE/MAX Connection Realtors only is providing this economic statement from Naroff Economic Advisors, Inc. for informational purposes.

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RE/MAX Connection Realtors, 1000 Lincoln Drive East, Suite Two, Marlton, NJ 08053 www.goconnectionnj.com

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