Friday, January 18, 2013

The Influence Of Housing

I have commented numerous times on housing and its impact on the economy.  Here is a short, information filled summary of housing data from Calculated Risk.  Housing starts were up 28% in 2012, but at 780K new starts, it was still the fourth lowest year of housing starts since records began in 1959, with the three other years being 2009 through 2011.  Here is more data:
• Starts averaged 1.5 million per year from 1959 through 2000.  Demographics and household formation suggests starts will return to close to that level over the next few years. That means starts will come close to doubling from the 2012 level.

Residential investment and housing starts are usually the best leading indicator for economy. Note: Housing is usually a better leading indicator for the US economy than manufacturing, see: Josh Lehner's The Handoff – Manufacuturing to Housing. Nothing is foolproof as a leading indicator, but this suggests the economy will continue to grow over the next couple of years.

In many markets the housing bubble began to lose air seven years ago.  That's a long time with declining and stagnant prices.  The housing sector is now contributing to GDP, and this will continue and help other sectors like retail.  The housing recovery is just getting started and has a long run ahead. 

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