Goldman Sachs: Demographics Will Send Housing Starts Higher

Wednesday, 21 Nov 2012 09:11 AM

By Dan Weil

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Good news has abounded for the housing market recently, and Goldman Sachs economists Hui Shan, Sven Jari Stehn and Jan Hatzius predict it will continue at least through 2016.

On Monday, the National Association of Realtors reported that existing home sales rose 2.1 percent in October from September, putting 2012 on pace to be the strongest for sales since 2007.

And on Tuesday, the Commerce Department reported that housing starts rose 3.6 percent in October to an 894,000 annual rate, the highest since July 2008.

Editor's Note: Startling Proof of the End of America’s Middle Class. Details in the Video

As for the Goldman economists, they predict that annual household formation will increase from its current 1.0 million rate to 1.2 million in 2013 and 1.3 million in 2014-2016, according to a report obtained by Business Insider.

The increase will come from gains in the “headship rate,” or the rate at which individuals become heads of households, the economists say.

Combining the household formation numbers with their view of home inventories, the Goldman trio expects the annual housing starts rate will climb to 1 million by the end of 2013 and 1.5 million by the end of 2016.

Others share their enthusiasm.

“The housing industry is in a recovery,” Larry Sorsby, chief financial officer of homebuilder Hovnanian Enterprises, tells Bloomberg. “Those builders that survived the unprecedented downturn of the last six years are in a good position not only to survive but to thrive.”

Editor's Note: Startling Proof of the End of America’s Middle Class. Details in the Video

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