Housing starts fell again in December. Only about 37,000 houses got underway last month in the entire country. “Year over year, housing starts were 45.0% below the level of construction in December 2007,” the Wall Street Journal noted.
Housing construction drives a huge portion of the economy, and is an extraordinary multiplier of economic activity. This isn’t debatable. But the stimulus package unveiled in the House of Representatives last week does nothing for the housing sector. Some had expected up to a $20,000 tax credit for the purchase of a home in the first two or three quarters of 2009, a huge kick in the pants to the buyers who are waiting for the bottom of the housing market to appear. Such an incentive would in effect create the bottom as savvy buyers rushed to take advantage of the credit and the low mortgage interest rates. With a recovery in housing would come a lessening in the concern about the value of the mortgage backed securities, and beyond that a general sense of relief among homeowners.
But the geniuses in the House didn’t provide the jump start. The Senate can repair that oversight, and even talk of doing so will start the recovery. Perhaps today’s news will focus the president and his economic team on the obvious things that need to be said and then done.