Here are 2 forces that'll boost US housing for years

The US housing market comeback is far from over.

Morgan Stanley credit analysts led by Vishwanath Tirupattur believe that positive trends will continue because of two major forces: favourable demographics and further improvements in the labour market.

“[We] note that the millennial generation is entering age cohorts characterised by rapid household formation,” Tirupattur writes. “Coupled with continued gains in employment and wages, this further portends and increasing demand for shelter.”

That being said, it’s important to note that “higher demand for shelter” doesn’t necessarily translate to higher demand for home ownership. This is especially true for millennials, who are more likely to be renters than buyers, according to the analysts.

“We expect that homeownership rates will remain on a declining trend as they have during the first quarter,” adds Tirupattur.

Still, keep in mind that household formation by renters still means housing supply is being filled. And that supply is owned by someone.

In the near-term, the analysts expect favourable seasonal forces to give a further boost.

“In our view, the US housing sector is poised to accelerate into the spring, a traditionally strong period for housing. Our economist colleagues expect that residential investment could be up 15% to 20% in Q2 and be an outsized contributor to growth versus struggling business investment and cautious consumption,” he concluded.

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