Residential investment has been a laggard throughout the recovery, but it is typically on the leading edge of economic rebounds. Bloomberg staffer Luke Kawa studies the historical housing data and expresses belief in what's ahead. A resurgence in U.S. housing starts, he believes, is more a matter of when, not if. Kawa writes,
And according to UBS, a bigger uptick in starts than the Street is anticipating is in the cards for 2016. The bank surveyed more than 2,000 U.S. adults to get a handle on evolving trends in their decisions to rent, buy, or sell homes in the coming year and over the long haul.Not only are the improved employment outcomes of "echo boomers" (the children of baby boomers) supportive of a pickup in construction, but the decoupling of adults who currently live together into separate residences, either as renters or owners, offers additional fuel for the market.
"Demographers believe that the recent growth and composition of the adult population should be associated with around 1.5 million households created per year," writes the UBS team, led by Chief Economist Maury Harris. "That is about where household formation was running in 2015 when the fraction of households that were shared stopped rising and edged down somewhat."
The share of "doubled-up" adults who plan to find or rent a place of their own in the next 12 months was broadly similar to the results of UBS's 2014 survey, which was a harbinger of increased household formation and, in turn, housing starts, Harris writes.