The Commerce Department’s report this morning on New Residential Construction in August 2008 (pdf) is generally being painted as dire news. To quote the AP:
The Commerce Department reported Wednesday that housing construction dropped a surprise 6.2 percent last month to a seasonally adjusted annual rate of 895,000 units. That’s the slowest building pace since January 1991, another period when housing was going through a painful correction.
The decline is larger than the 1.6 percent drop analysts expected and showed weakness in all the country except the West.
The data was bound to shake Wall Street, already rattled by a crisis in the financial system. Stock futures pointed to a lower opening.
Yeah, the data are certainly a sign that the housing market is a mess. But we already knew that! The only way to get out of that mess is to fix the current glaring imbalance between supply and demand. Cutting way back on housing construction is essential to that process.