Homebuilding Downturn Is Good News?

Analyst says the slowdown is needed to mop up excess inventory.


The government's sluggish that came out earlier this week certainly didn't seem like good news. But according to Dean Baker, codirector of the Center for Economic and Policy Research in Washington, D.C., that's just what it was.

From a report Baker issued Wednesday, via L.A. Land:

As noted before, the sharp downturn in starts is actually good news. There is a huge excess supply of housing at the moment, which just keeps expanding due to the flood of foreclosures. This inventory will most quickly be eroded if builders stop building new units. The sharper the downturn in construction, the quicker the inventory of homes on the market moves back to normal levels.