- That's hard to believe given single-family housing starts are on a pace of 622K this year, after 618K a year ago - a far cry from the pre-bubble average of 1.1M in the 1990s. Trouble is, says Kelko, the historical norm doesn't say what the level of construction should be now. Instead, look at the rate of household formation.
- If housing starts run ahead of the rate of household formation, homes sit empty and vacancies rise, and that's just what the latest data from the Census Bureau shows. As opposed to multi-unit rental market where vacancies are falling. Even with an increase in single-family rentals, the overall single-family vacancy rate ticked up to 10.7% in 2013 from 10.6% a year earlier, and vs. 7.4% in the pre-bubble days of 2000.
- For single-family vacancy rates to get back to normal, even household formation needs to increase or housing starts need to slow. In the meantime, it will be multi-family activity needing to lead the construction recovery.
- Separately, the former head of Goldman's housing research team says home prices are 12% overvalued today and have already started to slide. "I am lamentably confident that home prices will fall by 15% within three years."
- Homebuilder ETFs: ITB, XHB