Today’s announcement that the National Association of Home Builders/Wells Fargo housing market index remained at a level of 47 is pretty important news.
This follows eight consecutive monthly gains and continues to be the highest level since April 2006. Looking at the index for the last twelve months, the sentiment is up 22 points, the greatest increase since 1985.
So how important is this news? Well, it’s pretty huge.
Deutsche Bank [stock DB][/stock] analysts Joseph LaVorgna and Carl Riccadonna wrote in a note to clients, “if the pace of housing starts increases over the next year by the amount that builders’ sentiment implies, then the contribution from residential construction in the GDP accounts should double, as well, from 30 bps to 60 bps per quarter.”
It doesn’t stop there. The duo say that other housing-related factors, such as the greater consumption of household services and greater disposable income could boost the industry as a whole and contribute at least one full percentage point to total GDP.
“Housing is poised to provide a meaningful and critical lift to overall economic activity at a time when other growth drivers, like exports, are slowing,” say the analysts. “This should help to maintain year-over-year real GDP growth at least in the vicinity of 2% to 2.5% over the next several quarters.”
