The Economy's Impact on Housing

There is an old adage that all real estate is local but what about the economy? The national trends always play a roll, interest rates and exports but isn't the real impact of the economy local? When Micron or Hewlett Packard lays off workers it has a direct impact on the local economy.  What about housing?  Does the economy drive housing or does housing assist the economy? It appears to go both ways to me.  The following is a reprint of KCM Blog discussing this issue.

With the economic recovery sluggish at best, many ask what impact this has on housing. Over the last several years, most economists believed that housing would not recover until the overall economy recovered. However, it now seems that the housing sector may be a driving influence in the recovery.

Here are four reports released in the last 30 days affirming this point:

Morgan Stanley

“In terms of its contribution to real GDP, residential fixed investment has been a positive – albeit modest – force over the most recent four quarters, marking its longest span of back-to-back positive results since 2005.”

Deutsche Bank

“The [overall] resumption in residential activity cannot be understated as the long awaited housing recovery should help buoy consumer confidence and provide a mild lift to second half economic output after what was likely a disappointing first half of the year.”

Fannie Mae

“The data from the past month collectively point to decelerating economic growth, but growth nonetheless…However, despite signs of deteriorating momentum for economic activity, housing continues to be a bright spot as news from the housing market has been relatively upbeat,presenting a rare upside boost to the economy.”

Goldman Sachs

“As we look back at previous major housing recoveries, 1975 and 1991 began with negative jobs growth…In each case, the home sales recovery was fueled by home price improvement, driving new job growth and those jobs creating a fresh wave of demand that supported a multi-year recovery in housing.”

Is housing a victim to the current economic malaise? No. It may even be the cure.