October Housing Starts Fall; Obama Warns of Double-Dip Recession Possibilities
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After holding relatively steady for months, housing starts fell in October. One of the main reasons for the drop, say many analysts, is the fact that the fate of the first time home buyer tax credit was in doubt. As a result, builders slowed their projects. However, with the extension and expansion of the home buyer tax credit, there is a good chance that things will pick up again — at least until the end of April 2010, which marks the new deadline. MarketWatch reports on the expectations going forward:
“We believe housing starts’ strong decline to be only temporary, and should resume modest growth and stabilization over the next several months, as the tax credit extension should support market demand and perhaps offset some of the seasonal slowness in the winter months,” said Michael Rehaut, economist at JP Morgan Chase in a note to clients.
The tax credit, though, can’t protect the housing market from the economic realities of a weak labor market and slow economic recovery. Indeed, this morning President Barack Obama warned that conditions may be setting up for a double-dip recession. He did say that his administration was working on programs and ideas to prevent such a thing from happening, but he has put everyone on the alert.
Economic recovery has been slowed due to problems with joblessness. Companies are reluctant to hire, and that is causing some concern. Without jobs, people can’t buy new homes and help the housing market. Additionally, lack of employment makes consumer spending – which accounts for approximately 2/3 of the U.S. economy — difficult to boost.
It will be interesting to see how things play out going forward. Will Obama’s honesty about the possibility of a double-dip recession help people prepare for an eventuality? Or will his early warnings be heeded and a back slide completely averted? Only time will tell.
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