June 16th, 2009 by Michael Oliver

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May housing starts were up significantly (17.2%) and building permits followed with a 4% increase. While a definite good sign the numbers are not quite as good as they would seem when you look into them. First off most of the gains were in the multi-family segment (up 61.7%). But also its important to note builders have started more spec homes as they are trying to gear up and push as many finished homes as possible to make the $8,000 first time buyer tax credit by the deadline date of 11/30/09. Here’s an except from Diana Olick’s blog on cnbc.com:

50 percent of sales in May were on spec. She says we’re seeing a lot of spec homes now because, “today’s consumer wants to touch and feel the house.” The positives are that cancellations are down, sales are better and there’s less negative pricing, although discounts are still prevalent. “The patient was without a pulse in the fourth quarter,” Zelman notes, “and now the patient’s in ICU.”

To those that follow the housing market I think its obvious that while things may not be considered “good” yet the downtrend that has been ongoing for the past 3 years is getting resistance as buyer demand is showing itself much more then previous years. The overall real estate market (at least here in Tucson Arizona) is getting better; buyer sediment is up, active listings are down, and sellers are setting list prices more realistic then ever. The one item up for debate is what will happen if mortgage rates jump too much higher? That’s really the only variable to keep the Tucson real estate market from being thrown off its recovery course. Currently interest rates are running roughly 5.5% on a 30 year fixed. In my mind that is perfectly acceptable but push it past 6% or even 7% and it could thrust the buyers away from the table unless prices fell to compensate for the higher rates.