logo
  Join        Login             Stock Quote

Catching Housing Tailwinds

 January 18, 2013 10:28 AM


Housing data's been weak through most of the recovery and expansion. Economic growth nevertheless continued, as housing's small size relative to the overall economy muted much of its negative impact. However, recent improvements in housing data suggest the sector could provide an incremental tailwind to already resilient US economic growth moving forward.

For example, December new housing construction was up sharply to 103,000, or 12.1% m/m (36.9% y/y) over November. At a seasonally adjusted annual rate, starts clocked in at 954,000 homes.

Exhibit 1: US Housing Starts 1959-2012

[Related -Initial Jobless Claims Rose Unexpectedly]

Source: US Census Bureau, Thomson Reuters.

Since 1959, builders have started construction on an average of 1.5 million new homes a year. However, construction started on only 780,000 homes in 2012 and a mere 608,000 in 2011. Which translates to record low levels of new home supply. (Exhibit 2) Supply of existing homes is similarly well below historic averages. (Exhibit 3) 

Exhibit 2: Supply of New Homes for Sale

Source: Thomson Reuters, Bloomberg, as of 12/31/2012.

[Related -All Quiet on the Record High Front]

Exhibit 3: Supply of Existing Homes for Sale

Source: Thomson Reuters, National Association of Realtors, as of 12/31/2012.

At the same time, housing affordability is near all-time highs. Exhibit 4 shows the National Association of Realtors Housing Affordability Index. A value of 100 indicates a family with the median national income has enough money to qualify for a mortgage on the country's median-priced home. Values above 100 mean the median family has more than enough income to qualify, and so on.

Exhibit 4: Housing Affordability Near All-Time Highs

Source: National Association of Realtors, as of 12/31/2012.

Affordability is likely another factor goading housing demand higher—along with record-low mortgage rates (which, incidentally, also aid affordability). And when demand rises against constricted supply, all else being equal, prices should rise. Case in point, median prices for existing homes have risen over the past year. (Exhibit 5)

Exhibit 5: Rising Home Prices

Source: National Association of Realtors, Thomson Reuters, as of 12/31/2012.

We've often said a housing recovery isn't essential to economic or stock market recovery, and that's true of expansions as well. However, it's likely some continuation of housing gains, probably in fits and starts over time, provides an incremental tailwind to growth moving forward—a factor many folks still fretting housing's weakness fail to appreciate.

source: Market Minder
Disclaimer: This article reflects personal viewpoints of the author and is not a description of advisory services by Fisher Investments or performance of its clients. Such viewpoints may change at any time without notice. Nothin herein constitutes investment advice or a recommendation to buy or sell any security ot that any security, portfolio, transaction or strategy is suitable for any specific person. Investments in securities involve the risk of loss. Past performance is no guarantee of future results.
iOnTheMarket Premium
Advertisement

Advertisement


Post Comment -- Login is required to post message
Name:  
Alert for new comments:
Your email:
Your Website:
Title:
Comments:
 

rss feed

Latest Stories

article imageInitial Jobless Claims Rose Unexpectedly

Claims unexpectedly rose in the latest report through last weekend to breach 300,000 for the first time read on...

article imageAll Quiet on the Record High Front

What can we glean from the media’s lack of attention to the market’s recent record read on...

article imageThe Chip Maker Short Sellers Should Be Watching

Investing in semiconductor stocks is always tricky. Industry cycles can lead to bumps in the road for the read on...

article imageChicago Fed: US Economic Growth Slowed In October

The pace of US growth slowed more than expected in October, according to this morning’s update of the read on...

Advertisement
Popular Articles

Advertisement
Daily Sector Scan
Partner Center



Fundamental data is provided by Zacks Investment Research, and Commentary, news and Press Releases provided by YellowBrix and Quotemedia.
All information provided "as is" for informational purposes only, not intended for trading purposes or advice. iStockAnalyst.com is not an investment adviser and does not provide, endorse or review any information or data contained herein.
The blog articles are opinions by respective blogger. By using this site you are agreeing to terms and conditions posted on respective bloggers' website.
The postings/comments on the site may or may not be from reliable sources. Neither iStockAnalyst nor any of its independent providers is liable for any informational errors, incompleteness, or delays, or for any actions taken in reliance on information contained herein. You are solely responsible for the investment decisions made by you and the consequences resulting therefrom. By accessing the iStockAnalyst.com site, you agree not to redistribute the information found therein.
The sector scan is based on 15-30 minutes delayed data. The Pattern scan is based on EOD data.