Hope for housing is hope for the economy

Has anyone not noticed the cost of gas and milk has topped $4.00 a gallon? There is a growing chorus of voices chanting the "Inflation Is Here" mantra. Even though the White House and Federal Reserve are not quite ready to join in, the facts are prices in many sectors of the economy are on the rise.
This past week Warren Buffett, the quiet billionaire investor behind Berkshire Hathaway (BRK, Fortune 500), joined in the debate, "I think inflation is really picking up.It's huge right now, whether it's steel of oil.we see it everywhere."
Normally, the Fed will raise rates to discourage the acceleration of inflation. So, why is this cycle any different, why is the Fed likely to keep rates on hold for the near future?
Rising interest rates are the enemy of housing. The glut of unsold housing is a block to economic growth and any upward movement of rates will stunt economic recovery and prolong the current stall. In order for housing and commercial real estate, for that matter, to recover we must maintain a financial environment friendly to lending and borrowing. And it will take time for the demand for housing to absorb the excess inventory. A 6-month inventory is considered a buyer's market. Today, there is a 10.7-month supply.
The Joint Center for Housing Studies at Harvard University recently released their "The State of the Nation's Housing 2008" which finds that over the next decade the country is poised for a increase in housing demand.
"The good news is that we still have a growing population.As long as you have more households, more people are going to need places to live," says Nicolas Retsinas, director of the Center.
"If household formation continues at pace, prices will recover and starts will rise again," says economist Karl Case, of Wellesley College and the consulting firm of Fiserv CSW.
According to Harvard study there are three social trends that will have major influence on the housing market over the next 10 years:

.People are marrying and divorcing more often - this is the fastest growing household type.
.The "echo boomers" are aging and about to enter the housing market.
.There is an increase in the life expectancy for "baby boomers."
.There is a projected annual immigration of 1.2 million.
The study finds from 2010 to 2020, the U.S. household count will grow by an average of more than 1.4 million per year.
Keeping rates low will feed the economy as these households enter the market.