Salient to Investors:

Caroline Baum writes:

The residential real-estate market has just got going and only in the last 2 years has residential investment contributed in any significant way to economic growth.

July single-family housing starts of an annual rate of 591,000 is a long way from the peak of 1.8 million in 2006. The median time on the market for completed homes was 3.5 months, typical of the bubble years, so softer sales are a reflection of supply constraints.

4.6 percent is a pretty good rate for a 30-year mortgage: the early 1980s saw rates of 15 percent or more. The inability of many potential homeowners to qualify for a mortgage is still a bigger issue than rates.

Consultant Michael Carliner says that after years of falling mortgage rates, the first move off the lows tends to energize the fence-sitters more than deter potential buyers, and builders are not stuck with a lot of unsold homes. Carliner says house prices are rebounding from lows that were depressed by the large share of distressed sales and relative to 2007, prices are not that high.

The NAHB Housing Market Index leads the pack in both timing and predictive ability. This months reading of 59 is the highest since 2005. The S&P Supercomposite Homebuilding Index is down 29 percent since its peak in May 2013, technically a bear market: but the stock market has a habit of overpredicting recessions.

There are regional construction labor shortages in hot markets such as Seattle and Phoenix, and there are 2 million fewer construction workers today than at the 2006 peak.

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