The housing meltdown of a few years back resulted in a myriad of consequences, not the least of which were many Americans were forced to delay entry into the housing market. That trend has now been flipped. Growing confidence of the U.S. housing market among Americans has resulted in a surge of new homes rising up across the country.
According to Reuters, the number of new homes came in at nearly 1.2 million in 2012, which was about 100,000 more than the previous year and a far cry from the output of 2008 thru 2010 when there was average of just 500,000 new homes being started. As a result, new home building is at its highest level in more than four years, which has turned housing “from the economy’s sorest spot to its brightest,” Reuters reports.
The increase in home building still hasn’t been able to keep pace with the increase in household formation. This has led to the much-chronicled supply shortage currently being felt, notes an economist for Stamford, Ct.-based RBS.
“The rise in household formation bodes well for the economy,” Guy Berger told Reuters. “Instead of having too many houses, we are turning to a situation where there aren’t enough.”
To illustrate this point, Reuters notes how many students that graduated during the depths of the recession were forced to move back in with their parents. Now, they are starting to set out to form their own households because of greater confidence in the greater U.S. economy.
The housing market is showing such marked improvement that analysts are predicting it will take over from manufacturing as a key driver of the U.S. economy. In fact, one economist for JP Morgan forecasts residential investment will increase 22 percent in 2013, which would be the biggest increase since the early 1980s.