Housing starts data will illustrate why the Fed needs to cut rates

US housing starts are due at the bottom of the hour and forecast to rebound to 1.310m after falling to a post-pandemic low last month.

The long-term chart highlights the problem: US housing starts are significantly lower than they were in 1980 despite a 47% increase in US population.

The housing crash led to a bust in home building that was just turning around when the pandemic dawned. Low interest rates briefly spurred more building but that was quickly undone by high rates.

A healthy rate for US home construction is upwards of 1.6m units and I could argue it’s significantly higher than that. Fortunately, as rates begin turning, it should tick towards that.

This article was written by Adam Button at www.forexlive.com.