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Housing starts are still flat, but good news is accumulating

So we've now had two and a half years of very low and very flat housing starts. It took the nation's homebuilders three years to throttle back the construction of new homes by about 75%, and they've held to those minimal levels since late 2008. Residential construction is now only about 2% of GDP, which is almost next to nothing.

If starts were going to decline further, it would have happened by now. In the meantime, new household formations have continued at a pace substantially higher than new home construction, and so the excess inventory of homes has been sharply reduced. The next shoe to drop is painfully obvious: a shortage of homes is inevitable at some point, so new construction, and housing prices, will have to start picking up. It's only a matter of when.

The housing price data from Radar Logic, shown in the chart above, offer a tantalizing hint: the long-awaited rebound in the housing market may already be underway. It's too early to be sure, since the price bounce is still very modest, but the passage of time suggests this bounce may well be the real thing.

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