Household Growth Spurt Helps U.S. Homebuilders: Chart of the Day

Surging growth in the number of U.S. households “is definitely good news for homebuilders” and a reason to buy their shares, according to Sean Darby, Jefferies Group LLC’s chief global equity strategist.

The CHART OF THE DAY tracks the annual rate of household formations, based on data compiled by the Commerce Department and Bloomberg Intelligence. The pace is derived from monthly figures on the number of occupied homes, apartments, mobile homes and trailers.

There were 1.96 million more households in December, the latest month available, than a year earlier. The increase was the biggest since the 12 months ended in July 2005. During the final four months of last year, the pace of growth jumped more than sevenfold.

“New housing supply is not able to meet changing demographic trends” even though most new households are renting rather than buying, Darby wrote yesterday in a report. The Hong Kong-based strategist recommended buying the shares of homebuilders “and beneficiaries of home improvement.”

The acceleration also bodes well for economic growth, according to a report from Jonathan Golub, chief U.S. equity strategist at RBC Capital Markets LLC.

“Household formation has recently spiked,” the New York-based strategist wrote yesterday. “This has yet to show up in other housing metrics,” he wrote, citing housing starts as an illustration. January’s rate of starts dropped 2 percent from the pace in December.