‘The U.S. housing market is on fire’

Positive results in two recent industry reports led one industry analyst to make a bold statement this week.

"The U.S. housing market is on fire," wrote Gluskin Sheff chief economist and strategist David Rosenberg in a note to clients, according to Business Insider.

"The home building data was solid again in July with the level of housing starts coming in stronger than anticipated. Upward revisions to previous months make the history look better and firm building permit issuance is pointing to continue momentum," Rosenberg added. 

The housing market is set to outpace the economy for many reasons, including the following three:

  • Job growth and confidence: In 2014, 2.9 million private sector jobs were added, 736,000 of which were in the key home buying 25 to 34 year old demographic, a 15 year high. Wages are also on the rise. The combination of more jobs and higher wages is likely to lead to higher consumer confidence and a demand for homes.
  • Low inventories, high demand: According to recent reports, the inventory of new and existing homes on the market is currently at 2.3 million units, which is only about 1.6 percent of all households, a near 15 year low. This is expected to lead to a rise in demand and an increase in housing starts over the next two to three years.
  • Increased demand for credit: Even if interest rates rise at the end of the year, they will still be relatively low, historically. Combined with the fact that consumer debt service ratios are at 25-year lows, the demand for more credit from U.S. home buyers will likely rise.

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