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Could Weak Housing Tank The Economy Again?
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by juliaredstone | November 9, 2009 at 10:57 am
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For a big economic rebound, pray housing holds up.
Forbes: Welcome, gentlemen, to another discussion about the housing market and economy. Let's start with the 3.5% annualized rate of gross domestic product growth reported last week by the government. I initially was disappointed in the number. But I was surprised recently when economist Paul Krugman reminded us that 3.5% is nearly the same rate we averaged during the Clinton years. (Remember the 1990s? Weren't they awesome?)
Is tame-sounding 3.5% growth, if it continues for a while, enough to keep wind under the housing market's wings?
Michael Feder, Radar Logic: Our view is that you are asking the question backwards. It's not whether GDP growth will sustain housing, but rather will housing's recovery sustain GDP growth. Our figures have been showing stability since April and growth through the summer. To some extent, that "recovery" may be fueling the recovery in the economy overall.
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Most RecentMost Recommended Comments (2)
at 11:30 on November 9th, 2009
25% of the current market is from investors buying foreclosed houses at bargain prices. Probably 25-40% is first time buyers taking advantage of the $8,000 credit.
Eventually (and it won't take long), the investors will have an oversupply of homes to flip, or rent.
The tax credit will run out - even if extended.
With 10% (and rising) unemployment, tight credit, cutbacks in hours, and very pessimistic consumer sentiment, I doubt a recovery of any size in the housing market for a minimum of 2 years.
I speak from experience in the construction industry - including 25+ years, in and around the residential market.
The over supply of homes and lots, has to be cleared before any serious recovery can begin.
I also doubt that housing prices have bottomed. The flattening on the graph will more than likely prove temporary. Check back about April......you'll see.
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Mr. Kevin (not verified)at 06:39 on November 19th, 2009
The problem is with our young adults, the so called "lost generation". We are limiting their chances. Entry level jobs they would ordinarily fill are gone or being filled by older Americans. In decades past these "kids" would be moving into their own apartments and houses, but now cannot. How many kids do you know that still live at home, have been forced to move back home, or now live with their grandparents, or other relatives.Until we can provide entry level jobs for millions of this lost generation the housing market will never recover. We have tons of empty homes and no buyers to occupy them. Recovery isn't happening, it is a bold-faced lie. I rely on my extended circle of family and friends (which number over 30) to tell me what is really going on...not the agenda driven media. Right now over half my extended circle are unemployed (all had jobs in 2006). Four more just got axed in the past two weeks alone.This economy is what I call a mini-depression.