The housing sector may finally become a direct and meaningful contributor to U.S. economic growth in 2013 and beyond, according to NewOak CEO and Co-Founder Ron D’Vari.
D’Vari expects the sector to provide an estimated 0.5% boost to gross domestic product this year by already observed trends in new and existing home sales as well as permits. Thus far, the struggling U.S. economy has been pulled out of the recession by government and consumer spending and, as D’Vari notes, to a lesser extent by export-driven manufacturing.
Residential construction had been falling absent as early as nine months ago.
“While the gradual stabilization of home prices kept the economy from falling into a tailspin, other factors (government and consumer spending) helped dig the economy out of the great recession,” he noted. “Until recently home building and related activities were not contributing much to the GDP as housing construction had fallen to its lowest historical levels, far below its natural equilibrium.”
Global synchronized quantitative easing has pushed stocks and bonds to appreciate, although the appreciation is not sustainable long term. D’Vari noted that fast hands will sell at the first sign of any changes in Fed policy, but U.S. home prices are beginning to regain their historical mean growth of 3% to 5% despite the long reaction time.
But D’Vari added that the slowing REO sales volume and large amount of private equity capital rushing into the sector is the No. 1 driver of home price appreciation.
“Over time, we expect a gradual shift to end-user demand due to improved employment, household formation and fewer REO sales countering fading of private equity investments with improved home prices,” he said.
The housing sector touches many parts of the U.S. economy, including homebuilders, mortgage finance, construction companies & services, general contractors, construction supplies & fixtures, raw materials, home furnishing and appliances and related retail companies, according to D’Vari.
“Because of large reliance labor, the economic multiplier to the housing sector has been high. Therefore smart investors will be trying to read the tea leaves of the housing sector looking for telltale signs of the U.S. economic growth,” said D’Vari.