Housing starts are a good barometer for the construction industry's contribution to national economic activity. When the industry's recent performance is compared to historical trends rather than to just the years after the 2008 recession, it becomes clear that the industry remains mired in a profound slump. Last year it contributed less than half its potential to the U.S. economy.
Construction started on 1.072 million homes at an annualized rate in April. That is 22 percent below the 30 year annual average of 1.383 million; permits were issued for 1.080 million homes, also 22 percent below the 1.378 million average of the past three decades.
From 1983 to last year the American population grew from 233.79 million (July 1, 1983) to 316.99 million (November 1, 2103), a 36 percent increase. Yet in 2013 there were fewer housing starts, 0.929 million, than there were 30 years ago, 1.612 million (1983).
The second of the two recessions in the early 1980s ended in November 1982. In the five subsequent years of recovery housing starts average 1.731 million at the monthly annualized rate. Since the recession ended in June 2009 housing starts have averaged just 0.728 million a month.
The average U.S. population in the first five full years of the recovery from the 1982 recession, 1983 through 1987, was 237.992 million. If last year's housing starts had kept pace with the 33 percent population growth (to November 2013, 316.99 million) there would have been 2.302 million new units begun last year. In fact construction began on only 929,666 units in 2013, barely 40 percent of the population corrected projection.
Only in comparison to the collapse of 2008 and the following five years of inactivity can the current level of housing construction be called a recovery. In reality it remains a problem of historical proportions.
Chief Market Strategist
WorldWideMarkets Online Trading