By Joshua Steiner, Hedgeye
There has been some misguided housing buzz circulating around the idea that new households will be sprouting up at a rapid clip this year. Some are even claiming that households will be cropping up at the fastest rate since 2007.
It's true that household formation has been running below historical levels for the last several years. However, that doesn't allow us to jump to the conclusion that we should be bullish on housing going forward.
Any prediction that household formation will pick up relies on the assumption that a strong increase in employment is on its way. And while last week's jobs report, which said that non-farm payroll employment rose by 244,000 in April, is encouraging news, the job market is still very much recovering and by no means recovered.
We're not suggesting that the employment situation can't continue to get better -- it can. But the employment situation must get a lot better for the optimistic household formation predictions to come to fruition.
A household is not a house
Newly formed households do not necessarily represent home buyers -- in fact, it's far more likely that people moving out of their parents' basements will be renting an apartment, not buying a nice 3-bedroom. More
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