... [T]here remains significant pent-up demand, due in part to the underproduction of new homes over the past decade, as well as the impact of many millennials delaying homeownership decisions. We are finally seeing the millennial generation start to transition from renters to homeowners.
– Toll Brothers CEO Douglas Yearley
One of the recurring questions we continue to hear from clients is, “What’s going on with the housing market, and can it last?” This is a topic we last wrote about back in July (Economics Weekly: Housing Has Been Remarkably Resilient During This Crisis), with the view that the strength in housing—despite the pandemic—was durable and was likely to continue in the coming years.
In this Economics Weekly, we revisit this narrative and draw very much the same conclusions—i.e., that the current expansion in the housing market is being driven by a number of short-term factors, on top of a longer-term more powerful demographic shift that is firmly underpinning activity. Given the housing sector’s high multiplier impact on the rest of the economy, this will be a key factor helping to boost growth moving forward.
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Richard de Chazal, CFA is a London-based macroeconomist covering the U.S. economy and financial markets.