The pace of new housing starts in the US has accelerated to its fastest rate in three years, providing a bright spot for US investors unsettled by weakening macro data.
Housing starts rose 6.9% last month to a seasonally adjusted annual rate of 790,000 units, the highest rate since October 2008, according to the Commerce Department.
Its report said the increase was spread broadly throughout the sector, with ground-breaking for single-family homes up 4.7%, a segment which accounts for most of the market.
Investors have been eyeing the stabilising US housing sector, which collapsed five years ago, as a bright spot amongst otherwise disappointing macro data this year, including rising unemployment, weak retail sales and consumer sentiment.
According to Nabeel Mughal, co-manager of the £98m Melchior North American Opportunities fund alongside Peter Kaye, the reduction in inventories in the US housing sector has been particularly encouraging.
"US housing is a beacon of light amid all the negatives surrounding the US economy. There has been a massive reduction in inventory levels, which is encouraging, and the balance between supply and demand is reaching a equilibrium, particularly in Pheonix, San Francisco and Miami," he said.
Mughal and Kaye own several US building materials companies to capitalise on this trend, including USG Corporation.
Many US investors have voiced concern over the upcoming ‘fiscal cliff' faced by US legislators, when a series of Bush-era tax cuts finish at the end of the year. Forecasts are predicting it could slash 4% off GDP.
However, Mughal said this is unlikely, even though the issue is yet to be resolved by Congress.
"I would be surprised in the fiscal cliff is not resolved next year and the tax breaks for middle income earners are extended. It would not be in the US government's interest to let the situation deteriorate to what we saw last year," he said.
"Quantitative easing is now one of two main talking points including the US election. Given industry is starting to slow, unless we see some horrible employment data, then we may get another round of QE in September. The fact is the US economy is slowing and we need to see action from the Fed," he added.