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Housing Starts - Empirical Study

Senior Seminar


Housing Starts: an empirical study

Introduction
The housing sector is of importance in virtually any economy. The housing market is not a market in a classical sense but a series of overlapping submarkets differentiated by location, age of dwelling, type of tenure, age and quality. It is a basic necessity all over the world. First, housing is an essential consumption element that takes up a large share of the typical household's budget. Second, housing is the dominant asset in many household's portfolio. Third, housing production and maintenance constitute an important segment of the economy's production sector. The housing sector plays an important role in the formation of the business cycles. Strong housing demand reflects the condition of the performance of any economy. Increase in the housing demand and housing starts reflects the confidence in the economy. Throughout recent economy, the housing sector surprised many economists with its amazing strength. At the same time home builders continued to meet that demand and as a result the investment in the housing sector never faltered throughout the recession. This performance strayed out of the norm; this prompted many economists to do further work on the subject. The housing boom has led to the increase in employment in the construction sector while other manufacturing and service sectors are facing severe job losses. Moreover, home owners have been able to finance higher priced housing by taking advantage of lower interest rates.
The number of housing starts is influenced by a number of factors some demographic and others economic. Demographic changes like huge migration, increases the housing starts in a particular area. The median age of the population also affects the demand for starts. The baby boomers have been a dominant demographic factor in the last 20 years. The aging of the baby boomers have led many economists to speculate that housing starts will decrease over time and...