This is exchanges at Goldman Sachs where we discuss developments currently shaping markets, industries, and the global economy.

I'm Jake Seward, Global Head of Corporate Communications here at the firm.

Today we're going to talk about the U.S. housing market and how it's been impacted by the change in interest rates. We're joined by Marty

Young of Goldman Sachs research who has a new report out on this topic.

Marty, welcome to the program.

Thanks for having you, Jake. So obviously housing is in one of the most rate sensitive sectors of the U.S. economy.

What have you seen over the past year in terms of how the low interest rate environment has had an impact on the housing market and the dynamics between supply and demand.

Yeah, absolutely, you're right.

If you compare home building to other sectors of the economy

like software investment or food consumption, housing demand is certainly

much more geared to the interest rate cycle. And we've seen a consumption housing

housing demand is certainly much more near to the interest rate cycle.

And we've seen a meaningful pickup in housing

construction in the second half of 2020 on the back of high demand for housing.

2020 Q4, that was the highest quarterly level of housing starts since

2006 and not even just construction of new homes but we've seen large demand for

existing homes, people moving out of apartments and into single-family homes.

In general, demand for housing saw a sharp B-shaped recovery starting in June of last year.

So some of these dynamics were in place before the pandemic hit.

I mean, we had some demographic tailwinds.

So how much of this is pandemic related versus the broader industry tailwinds that we saw even

before 2020? You know that's a good question. 2020 was strong and a decent amount of that does reflect we think fundamentals that were in place even before COVID.

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