Housing’s Positives to Strengthen, Spread to Other Industries

by Peter Thomas Ricci


The housing market is expected to grow even stronger as the year progresses, with its gains spreading to other industries.

A number of prominent economic analysts are anticipating good things for the housing market in the coming months, with home prices, mortgage delinquencies and foreclosures all moving in positive territories and further strengthening the already recovering industry.

The end result, as reported by Bloomberg, will be an industry that “packs punch,” one whose influence spreads to other sectors of the economy and promotes wider economic recovery.

Housing Market Entering ‘Higher Gear’

One of the housing market’s strongest boosters has been Mark Zandi, the chief economist for Moody’s Analytics, who foresees housing picking up more steam as the year takes shape.

“The housing recovery will kick into a higher gear as the year progresses,” Zandi said. “We’re going to get a lot of juice from the [market’s many] channels.” Those channels, Zandi explained, include rising residential construction, which will boost the U.S. GDP by about 0.75 percentage points this year.

Also, as Bloomberg noted, there are other, cyclical developments expected to occur, as well. Foreclosure filings are down 10 percent, mortgage delinquencies by 0.4 percent points and home prices are on the rise, all developments that clear up bank balance sheets, lead to additional lending and, ultimately, greater property tax revenue, which will alleviate the pressure on local government budgets.

“Spillover Effect” of Housing

And thus, the famed “spillover effect” of housing, which we recently wrote about, is apparent once again. The housing market, Bloomberg pointed out, has led the economy out of every recession since 1950, and though the economy technically ended its recession in 2009, the evidence seems to be mounting that the housing recovery will push the economy further toward its own sustainable recovery.

The examples abound: when new homeowners move into their new residence, they buy appliances and furniture, aiding retail companies; those amenities need to be installed, aiding those workers; and finally, construction equipment will be need for improvement, as will paint and building materials for interior upgrades.

And that sequence of events does not even factor in the separate consumption habits of those new homeowners. Recent research by Karl Case, John Quigley and Robert Shiller estimates that rising home prices bolster the confidence of consumers, and that in 2013 alone, consumer spending will increase by $80 billion as home prices rise.

James Bullard, the president of the Federal Reserve Bank of St. Louis, put it best in a recent interview: “The psychology has shifted. Good things are happening.”

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