Believe It or Not, The US Real Estate Market Has Room to Run

Believe it or not, the US Real Estate Market has room to run. Despite the reflation of the US Housing Bubble to pre-financial crisis highs, investment in the sector has been sorely lagging.

After soaring to a near all-time high of 6.69% of GDP in 2005 (only the post-war housing boom circa 1950 was marginally higher - by 0.02%), Private Residential Fixed Investment plunged to an all-time low of 2.46% of GDP in 2010. Today, that ratio has recovered to 3.87% of GDP as of 2017. This is still way below the ratio's historical average of 4.84% of GDP for the past seventy years.

The data is borne out of Housing Starts data. Housing Starts have recovered, but not to pre-crisis levels.

Moreover, housing starts have not kept us with population growth.  As of December 2017, New Privately Owned Housing Units Started as a % of Total US Population was just 0.36%, way below the historical average of 0.60% established since 1959.

This under-investment accumulates and the cumulative underhang of Private Residential Fixed Investment in the US stands at a -9.28%, lower than the previous record low of -2.21% of GDP in 1997, a few years before the US Housing Boom of the 2000's.

This will only serve to lay the groundwork for another spectacular US Housing Boom in the years to come, perhaps in the 2020's or 2030's.