· Housing may help give the economy a lift
· NEW YORK – Nov. 9, 2012 – Lately, the housing market may be the one thing going right for the economy, Reuters reports. Several signs have pointed to a housing market in full recovery mode.
“Higher sales, prices and building, albeit modest so far, are a welcome boost as other drivers of the economy falter,” Reuters reports.
Unlike the “boom” years, housing has accounted for a small fraction of the gross domestic product in recent years. In 2005, it accounted for 6 percent, compared to 2.5 percent in the third quarter of this year.
The housing sector “would have to be on steroids to significantly boost GDP growth,” Paul Dales, an economist with Capital Economics, wrote in a recent research note.
Still, several economists are hopeful that residential investment could add two- to three-tenths of a percentage point to the GDP next year.
An increase in housing-related jobs also may help give the economy a lift. Housing-related jobs increased an average of 11,000 per month this year, a significant shift from 2011 when housing-related jobs declined, on average, by 1,000 per month.
But even the 11,000 per month could pale by 2013 if they hit an average of 30,000 per month, as predicted by Jim O’Sullivan, chief of U.S. economist at High Frequency Economics. That could make housing a significant contributor to chipping away at the unemployment rate. Analysts estimate that the economy needs 150,000 jobs created each month to keep the unemployment rate steady.
Housing may also help lift consumer spending, another important factor that needs to increase to give the economy a jolt. Real estate wealth can help, economists say. As more homeowners refinance into record low mortgage rates, these households will have more to spend.
Source: “Housing Market Rebound Fails to Recharge Economy,” Reuters (Nov. 5, 2012)
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