In mid January, the US housing data was released and it was very good news – the numbers are increasing. In an article by Lucia Mutikani of Reuters, US housing starts jumped 16.9% in December to a seasonally adjusted annual rate of 1.608 million units the highest level since December 2006.
New housing has a ripple effect in the economy, if you buy a house you need to furnish the house. You will need a vehicle to get to the home and you have a regular income to be able to finance the home. All of that is good news for the economy in general. The housing market accounts for 3.1% of the economy but filters through the greater economy with spinoffs.
Although in the northeast, we experience snow on the ground or frozen earth which means the expected January numbers will be, there are many parts of the country where houses can be built.
Economists polled by Reuters had forecast housing starts to be at a pace of 1.375 million units in December. Realtors estimate housing starts and completion rates need to be in the range of 1.5 million to 1.6 million units to plug the inventory gap.
Housing starts include single family housing and multi family housing (5 units or more) and both were up in numbers.
Linking to dividend paying stocks, the housing market is a good indicator of how the economy is doing and when it is up, that is a good thing in general. Similar to all national numbers, you then have to decide where are the housing starts happening and where are they not. A number of years ago, the writer read the City of Detroit had not issued on building permit, changes happen and the City of Detroit is issuing permits now but took a long time to change. Macro numbers are just that macro numbers, you will need to do homework before you invest, sometimes you do need to think locally.
There are more questions than answers, till the next time – to raising questions.