(Export Development Canada – Peter G. Hall)
Talk casually to anyone about the US housing market, and you’re likely to get a good volley of the latest reasons why it is never coming back. Data have been so weak for so long that it’s not hard to become convinced that this is just part of a ‘new normal’ of lower activity. But something is stirring in the market: housing starts jumped 11% in the latter half of 2011 from the average level in the preceding 30 months. Is the market telling us something?
We believe so. But whether it is or not, is there reason to believe that at some point in time, the market is destined for a sustained higher level of activity? Two key points suggest so. First, the housing surplus is now shrinking by a million units a quarter; if this keeps up, the market could be nearly balanced by year-end. Second, current activity is well below normal. US population data indicate that net annual household formation – the basic number of new units needed – is 1.4 million. Even with recent growth, current starts are only 660,000. There is still a lot of room to grow. Read more here.
Date: February 17, 2012