Freddie Mac in its latest housing outlook made the claim that housing is the “juice” needed for the economic recovery to fully accelerate.
This is especially true when looking at the potential for building construction to spur economic activity.
Analysts at Freddie Mac anticipate GDP growth of 2% to 2.5% in 2013, below its 3% to 3.5% potential.
The percent of the population participating in the labor market was at 63% as of April 2013, lower than any time since 1980. However, the relationship between the unemployment rate for construction workers and job openings has not shifted, as it has for all other workers.
Housing starts are anticipated to rise by about 200,000 units in 2014 compared to 2013, indicating the unemployment rate for construction workers should drop by around 1.5 percentage points and add 100,000 to 200,000 additional jobs in construction alone.
“While the broader labor market might be facing a skills-match challenge, in the construction sector, it’s a matter of structures, not a structural employment problem,” said Frank Nothaft, Freddie Mac vice president and chief economist.
The median time-on-market for new homes as of March was 5 months. Although this is in line with historical averages, it is down dramatically from the Great Recession high of over 14 months.
Nothaft said, “Household formations are expected to gradually rise to a 1.2 to 1.4 million annual pace in coming years, supporting a sustained level of construction. Supplement this with replacement of existing stock and building for the second-home market housing starts should rise to 1.7 to 1.8 million dwellings by 2017. This will supply the juice to help strengthen the recovery.”
See Frank Nothaft’s opinion on the housing market in the video below.