Housing Starts & Family Formations

This graph illustrates a sharp increase in family formations. By the end of 2012, I would expect single family housing starts to reflect this same level of increase.

For the past three years, the decline in family formations has been due to many factors none being more significant than the economy. This pent-up demand will fuel housing starts regardless of the overall economy.

This would be great if housing got some traction and built us out of the great recession. There is a lack of housing inventory (supply) and the increase in demand will cause prices to increase. A sharp increase in housing activity will also strain material suppliers and cause material shortages. The housing labor force has basically disappeared over the past three years and it will take some time to rebuild the capabilities.

For a seller - list your home now.
For a buyer - you may have waited too long if you were striving for a "deal"
For land owners - residential zoned land may actually be marketable

There is another aspect of the home building industry which has not been evaluated to any extent. Local regulations!! It has been my experience that local government continues to find ways of controlling land regardless of economic conditions. Local government has had a free reign over the industry for the past three years. Let's investigate the results of their efforts.