10/17/12 2:56 PM – Why Housing is Recovering

Housing starts for September were reported today as up 15%. That’s a welcome number, albeit from a very low base.

Why now? Well, it doesn’t have nearly as much to do with record low interest rates as other factors.

1) Extremely low housing inventory, especially on new homes
2) Those who lost their homes in 2007 are now past the five-year waiting time to qualify for a mortgage. Of course, this will pick up considerably the next 2-3 years.
3) Natural population growth

More growth will be forthcoming with a better economy as young adults move back out from their parents’ homes and/or quit putting off getting marrried.

Housing is no longer the big part of the economy it once was so the ripple effect from this, while welcome, is smaller than people might assume. Still, put this together with good retail sales and we have some good news for the economy.