Morningstar: Home Construction Boom Just Around The Corner

A boom in housing construction is just around the corner, an analyst said Monday.

An improving job market and loosening lending standards will unleash pent-up demand and lead to the best decade for residential construction since the 1970s, in the view of Morningstar's Daniel Rohr.

Top sector picks according to Rohr: the lumber concern Weyerhaeuser Co WY, steelmaker Nucor Corporation NUE and home builder NVR, Inc. NVR.

Banks well positioned to benefit from a mortgage boom include U.S. Bancorp USB, BB&T Corporation BBT and Fifth Third Bancorp FITB, according to Rohr.

Rohr forecast annual housing starts of 1.9 million by 2019, up from 1 million recorded last year and comparing with a consensus estimate of only about 1.45 million.

The prediction "might sound outrageous given the disappointing recovery of the past few years," Rohr said. "But the outlook is so promising precisely because the recovery has been so poor."

The coming decade will see millennials, the largest generation in U.S. history, form households and buy homes for the first time, Rohr said.

A weak job market coupled with tight credit and high consumer debt has so far stymied what Rohr sees as inevitable "demographic potential."

Rohr forecast an average of 1.6 million annual housing starts through 2024, a rate bested during the postwar era only by the 1.75 million average annual starts of the 1970s.