Housing Starts Saw an Increase in August: How Home Owners and Buyers are Affected by the Shift

The Commerce Department released new numbers Thursday revealing that U.S. housing starts (i.e. the start of constructing a new housing unit, such as an apartment, house, mobile home, or even a group of rooms) saw an increase in August of 1.5% to a seasonally-adjusted 598,000 annual rate. While the increase in August didn’t meet economist expectations, it helped to offset the loss in June of 0.2%, which was the first after five straight months of increases.

Each month, the Commerce Department offers seasonally adjusted annual rates (SAARs) for “housing starts” as a way to gauge how many new houses are being constructed. The SAAR helps to decipher month-to-month data without allowing it to be affected by seasonal shifts that could create a sharp contrast in numbers. For instance, fewer houses may be built in the winter due to weather conditions. To account for the inevitable shift in new housing starts that may occur from November to December, SAARs are used to gather a reasonable average number each month.

The current Commerce Department report shows that the SAAR has increased, which is good news for U.S. builders looking for a positive outlook for single-family home sales. However, this news isn’t so great for homeowners who are looking to sell their properties. This is because new housing starts represents more homes on the market that will undoubtedly compete with homeowner properties already on the market. On the other hand, home buyers can rejoice because more competition usually results in a decrease in home prices.

Currently, home prices are fluctuating around the country; however, bank analyst Meredith Whitney says home prices could drop as much as 25 percent in 2009′s fourth quarter. Depending on which end of the spectrum you sit (homeowner vs. home buyer) this could be great or not-so-great news for you.