The Rising Influence of Rising Affluence

[DewDiligence]

(PCL)—[US] young adults are finally amassing the economic wherewithal to move out of their parents' homes—good news for homebuilders and home-improvement retailers…[and PCL].

…How many new [US] homes should we expect at this stage in our recovery? Before the recession, 1.35 million net new households were formed each year, as young Americans started families, existing families broke up, and with immigration. Annual household formation plummeted to about 550,000 between 2007 and 2011, ushering in a grim era of roommates and exasperated parents, before recently repairing to about a million. New-home construction is keeping pace: Housing starts rose to an annual rate of 1.11 million units in November, the best in more than five years.

…Assuming we need 1.4 million new homes a year, and 100,000 are torn down each year, annual construction should approach 1.5 million units, says Charles Lieberman, chief investment officer at Advisors Capital Management. "Pent-up demand will probably carry new construction to 1.7 million or 1.8 million units at the next peak."

http://online.barrons.com/article/SB50001424053111904681004579320590571468308.html

The 1.5M annual figure is consistent with what PCL’s CEO, Rick Holley has been saying (#msg-95575182). In other words, there’s still plenty of headroom for increasing new-home starts from the current annual rate of 1.0-1.1M.