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Investing Specialists

Spring Winding for Long-Term Housing Demand

As housing inventories drop, the market heads toward stability.

Last week I interviewed Eric Landry (), associate director of Morningstar's industrials and homebuilding team, following a very poor report on new U.S. housing starts.

Eric noted that the starts number for the month set a record low at 550,000 on an annualized basis and that full year 2008 sales amounted to a mere 904,000 new units. The outlook is for overall starts to be even worse for calendar-year 2009. The bright side is that these horrific numbers are extremely low compared with "natural demand," which we estimate at 1.3 million to 1.5 million units per year. In effect, the current situation is now winding a spring for long-term housing demand.