Housing to the Rescue Again? — PRAGCAP

Housing to the Rescue Again?

I got this email from Warren Mosler this morning.  He wrote:

“Looks to me like housing is finally in a very sustainable uptrend, supported by adequate federal deficit spending, modestly improving personal income, relatively high affordability, low consumer debt ratios, very low levels of actual inventory,tightening rental markets, etc. etc.

And looks to me that housing starts could double and still be at relatively low levels, so there’s years of upside with modest growth rates.

It also means GDP could gravitate up to the 3-4% range by year end, and stay above 0% even should we go over the fiscal cliff.”

The big thing is that it would be very unusual for GDP to contract with this sort of activity in the housing market starting to pick-up.  It’s just not consistent at all with recession.  As you can see in the chart below housing starts are always declining heading into a recession.  Granted, they’re not exactly booming right now, but this still isn’t consistent with recession.   I still think 2013 is the year of recession risk (maybe, just maybe Q4 2012 if the fiscal cliff actually materializes).  So I wouldn’t put me in the “very sustainable” housing recovery camp (I think we’re in for a post-bubble work out so there will be no bottoming “event” in housing).  But this seems to be a bit of good news for now in an otherwise sea of bad news…..

Advertisements

Leave a comment

Filed under Housing

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s