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Residential construction is in an upward trend

September housing starts exceeded expectations, and data from prior months were revised upwards. The pattern is becoming clearer with the passage of time: residential construction bottomed about 18 months ago, and the upward trend in this volatile series since early last year works out to a 14% annualized growth rate, which by itself is actually pretty impressive. For all the woes that still surround the industry, it remains the case that we have seen the worst and conditions are now improving, albeit erratically. We'll very likely to see substantial improvement over the next several years at least, given the depths to which activity sunk in 2008. I would note, of course, that residential construction now represents such a small part of GDP (about 2.5%) that the ups and downs of housing starts are going to have a very small impact on the overall economy no matter what direction the trend ends up heading.

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