Thursday, January 17, 2013

Housing starts on fire

The residential construction sector is in full-blown recovery mode, with plenty of upside potential left.


December housing starts jumped by 12% from November, exceeding all expectations (954K vs. 890K). Starts rose 37% last year, and they are up by a very impressive 77% in the past two years. Yet despite those impressive gains, starts are only now back up to the level that has marked the low of most of the recessions in the past 50 years. That's how bad the collapse was, but it also points to lots of upside potential—starts could easily double from here over the next few years. Residential construction will be a strong force sustaining overall economic growth for the foreseeable future.


The ongoing recovery in the housing market also provides support for further gains in home builders' stocks, and in many other housing-related industries.


Just in case you haven't been involved in trying to buy a house recently, it's a seller's market. The chart above shows the Radar Logic housing price index for 2011 (orange) and 2012 (white). Housing prices have strong seasonal tendencies, and typically decline from August through January. This year, however, they aren't declining. Prices in mid-November were 9% higher than in mid-November 2011. If my personal experience and that of close friends is any guide, there are bidding wars erupting and houses (especially the more affordable ones) are going for much more than their asking price.

5 comments:

  1. "on fire" = lower than lowest point during any recession since 1968 except one. [giggle]

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  2. why cheer for another bubble? why cheer that more people will be priced out fo the market or will take on too much debt? why cheer a planned part of the economy. you are so blinded by the need to cheer it makes you look kooky.

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  3. I hope this continues in the right direction...

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  4. Maybe it's a seller's market in certain west coast beach communities. It's not so in my area where another house on my block just sold for 10% less than the owner paid to build it in 2003. The sellers accepted a price that was 20% less than the asking price that they had dropped twice prior to the sale. It had been on the market for 1 year.

    When sales and housing starts numbers have been depressed for so long, the year over year increases will look good even if they are dead cat bounces.

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  5. ....what's the breakout of these starts vs multi-family or rental housing? Are those numbers included in these stats? Thanks dude~

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