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The 2 1/2 year bottom in housing starts

Housing starts have been incredibly weak for the past 2 1/2 years, much weaker than at any time since records were first kept beginning back in 1959. As a result, residential construction has fallen to a record-low 2% of GDP, after averaging around 5% since WWII. During this extended and bitterly painful construction collapse, the economy has recovered from a severe recession, personal income has grown 8%, retail sales are up 15%, after-tax corporate profits have surged 38%, Apple stock has more than tripled, households' net worth has risen by over $8 trillion, and the U.S. population has increased by about 6 million, among a host of other notable milestones. Housing starts are almost certainly well below the rate of new household formations, so every month that starts remain at currently depressed levels puts us one month closer to an inevitable boom in new home construction, since the excess inventory of homes is shrinking daily. The outlook for housing is thus likely to be stable at the least, and eventually extremely positive.

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