Economix: Assessing the Housing Sector

By Insider Monkey: By: Anil NainAfter a housing crash that saw trillions of dollars of wealth eroded, millions of Americans enter loan defaults and lose their homes, the collapse of Fannie and Freddie, and massive government bailouts, the housing market may have seen a bottom, recent data suggests.

Economic recoveries usually begin at home. Even though the housing construction has historically only accounted for roughly 5% of America’s economic activity, that number tends to rise following recessions, placing a disproportionate burden on the housing sector to lead the economy to recovery. Why is this? There are several reasons. First of all, since a new home is usually the biggest purchase any of us will make, we tend not to do it during recessions. Recessions cause housing demand to become pent up and then released once a recovery begins.

Economic recoveries usually begin at home. Even though the housing construction has historically only accounted for roughly 5% of America’s economic activity, that number tends to rise following recessions, placing a disproportionate burden on the housing sector to lead the economy to recovery. Why is this? There are several reasons. First of all, since a new home is usually the biggest purchase any of us will make, we tend not to do it during recessions. Recessions cause housing demand to become pent up and then released once a recovery begins.

New U.S. home construction rose in February and building permits climbed to the highest level in almost five years, adding to signs of progress in the housing market that’s helping boost the economy. Builders broke ground on 917,000 homes at an annual rate, up 0.8% from a revised 910,000 pace in January that was higher than initially estimated, the Commerce Department reported Tuesday in Washington. Building permits, a proxy for future construction, advanced 4.6% to 946,000, the strongest since June 2008.

By Tom Lydon: Homebuilder ETFs are trying to break out yet again on the latest round of upbeat data on the housing market. Some investors have scaled back on builder ETFs, or hedged recently, after the sector funds doubled in price the past year. So a fresh rally may cause traders to chase the breakout.

While the housing market has stabilized, investment in housing remains much less profitable than investment in business, an economic waste, an economist writes.

Taxes on business have created too much investment in housing and an abundance of housing stock, an economist writes.

Residential construction is acting as a drag on Canadian growth, but at this point, the landing in the sector still looks soft TORONTO — Canadian housing starts fell in November as both single and multiple starts declined, particularly in Ontario and British Columbia, Canada Mortgage and Housing Corp said on Monday in a report that adds to evidence of a housing market slowdown.