The following are the 10 reasons we are constructive on US housing and its
positive impact on our outlook for US equities:
1. Housing starts are unsustainably low at 750k, well below the 1.5mm long-term average, and we are likely at the front-end of a
construction boom in US.
2. Vacancy rates are reaching equilibrium, we est <700k excess homes, down from 1.7mm peak.
3. US Pop to increase by 15mm ‘12-‘17E, requiring 6mm incremental units of housing organically.
4. Homeownership rates to reach 67% by 2017 from 66% today as population >55 increases by 11mm.
5. We estimate 2.3mm pent-up household formation demand plus annual household formation is recovering to 1.1mm-plus over
next few years from recession lows of 300k.
6. Home prices are low on an absolute basis when looking at P/R ratio which at 19.9X is the lowest since 4Q87 and is the largest
discount vs 10-yr Treasuries (1/yield) ever.
7. Home prices are beginning to rise, already $1.6T annualized wealth effect since 1Q12.
8. Rental bubble is forming (making homes cheaper) with rents now 20% more expensive than buying.
9. Households have capacity for leverage with total mortgages down by 4mm since 2007 and debt service ratios the best since
10. Bank lending should begin to ease.