The ongoing growth in employment and real incomes and the recent increase in the stock market wealth of households should also support the demand for housing. Indeed, the latest data on home sales and consumer homebuying attitudes suggest that the demand for housing may be stabilizing.
While much of the downshift in the housing market appears to have occurred already, some further softening in housing starts may yet lie ahead as the inventory of unsold homes is reduced to appropriate levels. That said, it is encouraging that the recent weakness in residential construction does not appear to have spilled over to other sectors.