Yes, Europe is a mess, China’s economy may be cooling down to red-hot status, US unemployment rate is frustratingly high and an election year heightens domestic policy uncertainty. The irony is that the culprit that started all of this – Housing – may be a big piece of getting us back on track.
A housing rebound directly affects unemployment according to Joel Prakken at Macroeconomic Advisors who estimates that “a healthy pace of 1.5 million new homes a year would create about 50,000 jobs a month and lower the unemployment rate by 1.5 percentage points.” Housing is now less than 3% of US gross domestic product (GDP) after hitting a high of over 6% at the peak in the bubble. We had posted about the lack of hiring in construction that can be found by clicking here, but future improvement in housing over the next several years will be a big spark to US employment hiring in our opinion.
According to Liz Ann Sonders at Schwab… “The National Association of Home Builders (NAHB) Index rose 6 points to 35, still below the 50 mark that would denote a growing housing market, but the best reading since March 2007. Additionally, housing starts rose 6.9% to the highest level since October 2008. Although existing home sales posted a decline of 5.4%, the National Association of Realtors noted that the fall was attributable to inventory tightness, something that we haven’t heard in a while. In fact, there is now just a 6.6 month supply of existing homes for sale, versus 9.1 months a year ago. We’re not trumpeting the all-clear signal yet, but it appears to us that housing is now a help and not a hindrance to economic growth.”