A few key points:
' Housing starts increased 28.1% in 2012 (initial estimate). This is a solid year-over-year increase, and residential investment is now making a positive contribution to GDP growth.
' Even after increasing 28% in 2012, the 780 thousand housing starts this year were the fourth lowest on an annual basis since the Census Bureau started tracking starts in 1959 (the three lowest years were 2009 through 2011). This was also the fourth lowest year for single family starts since 1959.
' Starts averaged 1.5 million per year from 1959 through 2000. Demographics and household formation suggests starts will return to close to that level over the next few years. That means starts will come close to doubling from the 2012 level.
' Residential investment and housing starts are usually the best leading indicator for economy. Note: Housing is usually a better leading indicator for the US economy than manufacturing, see: Josh Lehner's The Handoff ' Manufacuturing to Housing. Nothing is foolproof as a leading indicator, but this suggests the economy will continue to grow over the next couple of years.
The following table shows annual starts (total and single family) since 2005:
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