Pennsylvania Trust

Another Promising Indicator

Another Promising Indicator

The U.S. housing market, an important economic indicator, is in great shape. December housing starts accelerated by 16.9% to 1,608K, far above the consensus, 1,380K. The much warmer-than-usual December weather likely boosted activity, but these are nonetheless extremely encouraging numbers, which will boost forecasts for Q4 residential investment.  Realistically, there is still room for the housing market to expand as levels are well short of the cyclical highs of the past.

While not at this pace, we expect favorable fundamentals to continue to support strong demand for new housing units:

  1. Solid consumer economic performance leading to elevated consumer confidence (focus on low unemployment and rising incomes);
  2. Demographics (aka “welcome millennials”);
  3. Tight supply (within the “reasonably priced market”)
  4. Low finance costs (30-year mortgage rate was 8% in January of 2000, 5.35% in January of 2010; Now stands at 3.80%)

Disclosure: This Commentary represents a review of topics of possible interest to Pennsylvania Trust’s clients and is not personalized investment advice. It contains Pennsylvania Trust’s opinions, which may change following the date of publication. Information obtained from third-party sources is assumed to be reliable but is not guaranteed. No outcome – including performance – is guaranteed, due to various uncertainties and risks. This document is not a recommendation of any particular investment. Investment decisions for clients are made on an individualized basis and may be different from what is expressed here. Past performance is no guarantee of future results.