I am a fan of continued low housing start numbers until the inventory of bank owned homes is mostly absorbed and job numbers start to improve. A problem is that low housing starts equals low job numbers in the construction sector.

I went and found housing starts data for the last 50 years and the current level is unprecedented. An eyeball look shows the U.S. economy absorbing an average of 1.5 million +- over the 50 year period. In only 33 months out of the last 590 has the rate of housing starts fallen below 1 million and then into the 800k to 900k range. Of the 33 months below 1 million, 11 have been in 2008 and 2009. Source here.

Current housing starts in the 500k annual range just will not keep up with population growth. The lag time of permitting, infrastructure, building and selling could push housing into a price bubble pretty fast once the economy starts to pick up.

Over the last 2 years homebuilders have built up cash and written down their real estate holdings. They can sit and wait for housing prices to rebound then start building homes that will be extremely profitable for those companies.

How fast this can happen is anyone’s guess. The recent collapse in housing has taken about 3 years. Housing starts peaked in January 2006 at an annualized 2.27 million. 2009 may end up being the greatest time in history to buy a home.

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