According to a government report released this morning, privately-owned housing starts dropped in May to a new 17-year low with the U.S. Department of Commerce reporting housing starts slipping 3.3 percent from April to a seasonally-adjusted rate of 975,000.

Economists surveyed by Briefing.com had expected housing starts to decline to 980,000.

Privately-owned starts include single-family residences as well as multiple-unit buildings.

Single-family housing starts in May declined 1.0 percent nationwide below April’s figure, also setting a new record low. It was also the fourteenth-straight month of declining single-family starts.

In the south, however, single-family starts increased 2.9% from last month, although they were still 37.7 percent lower than last year’s levels.

The housing market has been overloaded with record numbers of homes for sale, and the excess of inventory has been a drag on any potential real estate recovery.

While this latest government report may seem to indicate a market stuck in the doldrums, continuing declines in single-family housing starts are a necessary step towards an overall turnaround. While painful for builders and developers, many of whom are struggling to sell already-completed projects, the simple truth of the matter is that supply must be reduced to a sustainable level.

Investors in single-family residential real estate should be encouraged by the government’s latest report. Competing against large developers offering incentives and upgrades beyond those available to the typical investor has been extraordinarily difficult, and investors have been left at a decided disadvantage. As an increasing number of homebuilders are suffering from a housing boom gone bust, they’re putting projects on hiatus or even stopping altogether in mid-construction. The resulting reduction of completion only benefits the savvy investor who can step up and capitalize on the continuing difficulties experienced by homebuilders.

We’d love to be your Atlanta closing attorneys. Want to know more? Contact us and we’ll be happy to discuss how Harlan and Associates can be of service to you!

slide, originally uploaded by SpacePotato.