US housing market continues to recover

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By Leith van Onselen

The US Census Bureau last night released housing construction data for the month of March, which confirmed the ongoing recovery in US housing.

According to the Census Bureau, the number of dwelling starts increased by 7.0% in March to a seasonally-adjusted annual rate (SAAR) of 1,036,000, which was the highest level since June 2008. Most of the gain came from multi-unit starts, however, with single family starts falling over the month (see next chart).

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US housing starts are now up 47% year-on-year. Moreover, the housing rebound is also being reflected in US house prices, which gained 8% in the year to January, according to the Case-Shiller 20-city index (see next chart).

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There was one minor fly in the ointment, however, with permits for privately-owned housing units – an indicator of future construction – falling to a SAAR of of 902,000 in March, down -3.9% on February’s result (see next chart).

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Nevertheless, permits were up 17% year-on-year, although the rate of growth is slowing (see next chart).

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While the US housing market is clearly in recovery mode, both prices and the rate of home construction are well below pre-GFC levels, suggesting there is still a long way to go (see next chart).

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Unconventional Economist

Leith van Onselen is Chief Economist at the MB Fund and MB Super. Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.


  1. Definitely seeing it here in Nashville, Tennessee and across the State/ Southeast US. Construction companies are hiring again. Go some family members that are agent and they are actually selling stuff finally. Massive improvement for sure from what I am seeing.


    From Conclusion, pg19:

    Q: Is QE Behind the Recovery in Housing? A: Yes

     QE has changed investor risk preferences
    • Large investor participation in market for residential homes
    • Mom & Pop, institutional investors involved broadly in price rally

     Recovery is not supported by traditional fundamentals
    • Declining bank lending, agency volumes
    • Weak employment, GDP, home ownership

     End of bank refinancing boom not a function of QE
    • Policy drivers behind refinancing boom have run course
    • Streamlined refinancing rules likely to have modest impact in 2013

     Falling yields may cool investor passion
    • Gross yields on public rental strategies imply net 4-5% net returns
    • HPA seen in 2012-2013 may not be easy to capture

    And add to this the major slowdown of fraudclosure filings and you have a choked off supply into the above described QE environment.

    TL;DR – To paraphrase the Princess Bride:

    “Recover”… You keep using that word, I do not think it means what you think it means.

    • It is very much more an artificial “recovery” in the cities with inelastic housing supply and high price volatility. At least in the stable-price cities, the QE is leading to houses being built, mortgages paid off faster, discretionary income increased, and investment with self-liquidating debt increased (in contrast to the increase in non-self-liquidating debt that marks the land-price-bubble cities).

      These cities are also growing because of population and businesses leaving the “price volatility” ones, where prices are “recovering” largely due to another, and even more insane, round of “investor” activity, probably with explicitly malign intentions re eventual further bailouts.