Wednesday, April 17, 2013

Housing Starts

Don't look now, but the economy is coming back. Housing starts have always been a leading indicator of economic growth. If their is demand for housing, then someone will start construction to build it. When construction starts, hiring goes up. When hiring goes up, then money filters down to the bottom rungs of the economic ladder where the highest economic multipliers are. These people can then afford new homes of their own. The cycle continues and becomes self-reinforcing.

For the last few years, we have been looking for the green shoots of the economy. Believing that this time could be different. This time the leading indicators could be something else, like manufacturing, technology, or retail sales. As it turns out, we did not break free from historical trends.  This time was the same as always.

 It's still about the economy, stupid. And the economy is still about housing.

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