Having collapsed in April, housing starts in both the US and Canada have rebounded sharply with Canadian starts now at a year-high and US starts re-approaching the post-Global Financial Crisis highs reached around the turn of the year. As opposed to 2007-2008, when housing was at the epicenter of the crisis, it appears to be a stabilizing force in the broader economy today. Albeit being challenging in the short term, COVID-19 may also lastingly alter consumer preferences in favor of home ownership.
In May we had highlighted the sharp rebound in US mortgage applications as an early signal that the housing sector was shaping up to be a leader in the post-shutdown recovery phase. We also identified the homebuilder industry as a potential beneficiary as the economy started re-opening. Three months later, there is abundant further evidence that establishes housing as a recovery leader not just in the US economy but also in Canada. The strength of housing today stands in sharp contrast not only to the more muted recoveries in other sectors (particularly leisure, hospitality and air travel) but also to the Great Recession experience. Whereas housing was then at the epicenter of the crisis, it is now a stabilizing force in the broader economy. Perhaps there is no better representation of this extraordinary contrast than the performance of the National Association of Home Builders (NAHB) Housing Market Index (HMI) in the United States (US) (Figure 1).