Given the abundance of bad news these days (Fed "tightening," Chinese slowdown, global growth slowdown, xenophobia, Iran going nuclear, Brazil meltdown, sluggish US growth, stock market corrections, etc.) good news doesn't get the press it deserves. So here's a modest contribution:
Housing starts are up 25% in the past year and 120% in the past four years, and look to have plenty of upside potential given household formation growth and scrappage. Builders' sentiment hasn't been this strong in almost 10 years. Together, the two strongly suggest further improvement in residential construction for the next year or so, and they further suggest that households are regaining confidence in the future of homeownership. Confidence, as I've argued for years, has been the thing most lacking in the current business cycle recovery, so this is good news.
As a corollary, an index of the stocks of 18 leading home builders has more than tripled since early 2009, and is very close to an 8-year high. Yet prices are still 40% below their "bubble" high of 10 years ago: lots of improvement, but still lots of room for future growth.
UPDATE (Sep 17): August housing starts fell, coming in a bit lower than expectations (1126K vs. 1160K), and prior months were revised downwards a bit. This runs counter to the gist of this post, but does it change the big picture? Hardly. This series is notoriously volatile on a month-to-month basis. Starts likely remain in an uptrend, and the rise in builders' sentiment supports the outlook for continued gains in the months to come. Here's the updated chart, which you can compare with yesterday's version above: