Housing is a leading indicator, but is it cash for clunkers demand?

Jon Fisher, a professor at the University of San Francisco School of Business presents a compelling graph on the relationship between housing starts and the end of the recession. He argues that the turn in housing is a very good leading indicator. By that measure, we are headed in the right direction. However, there is a whole lot of catching up to match what occurred in the recession/ It is not clear that housing starts will ever come back to the levels we have seen in 2002-2005. The housing industry has been hit especially hard during this recession. The demographics and wealth are changing. Nevertheless, housing is an important indicator of how consumers are will to make long-term investments. The government has also set up tax incentive and subsidies for housing that we do not see in other industries. It is the front line of the stimulus package.

We will have to see if housing is able to continue on an upward path without government help. This is another cash for clunker program of pushing demand forward and will affect future starts.