GHARIB: It`s a big week for housing data. We`ll see the latest on housing starts, December sales and get the outlook from the nation`s home builders. Commentator Richard Dekaser is optimistic that the housing recovery is gaining traction. He`s Deputy Chief Economist at the Parthenon Group.
RICHARD DEKASER, ECONOMIST, THE PARTHENON GROUP: After three years best described as bouncing along the bottom, the housing market ended last year on an encouraging note — sales, construction and homebuilder sentiment all improved markedly. And as we turn the page on 2011, there are reasons to be optimistic about the outlook for 2012. First, the overhang of unsold homes has fallen sharply. The glut of existing homes for sale is down 30 percent since its 2007 peak and the supply of new homes is at an all-time low.
New foreclosure activity is also falling, down about 25 percent over the past three years. And with recent declines in unemployment, that downtrend is almost sure to continue. As for the demand side of the housing market, the tailwinds are only getting stronger. It now takes just 15 percent of the typical family`s income to finance a home purchase. That`s half of what was required during the boom and the most affordable things have been in half a century.
Demographics are also looking up. Labor market improvements have enabled more and more folks who`ve been co-habitating out of necessity or living with their parents, to move out on their own. The first nine months of last year, for example, witnessed as much household formation as during the previous three years combined. So with less supply and more demand in store for 2012, conditions are ripe for a housing market improvement as the year unfolds. I`m Richard Dekaser.