The more encouraging takeaway from these latest figures is that despite slower expansion in U.S. labor markets, slower rate of exports as growth in emerging regions subsides, and the uncertainty that looms over the nationaEUR(TM)s fiscal situation, the economy is NOT crumbling. What initially drove us into recession has created legs that can help accelerate growth. While housing itself makes up a smaller slice of GDP, the building of structures creates much needed jobs in the construction sector. And it doesnaEUR(TM)t stop there, as new owners are likely to purchase big-ticket items, such as furniture, appliances and so on.
Some economists and pundits may argue that the FedaEUR(TM)s announcement of QE3 (open ended program of asset purchases) or, in this case, the anticipation of such an announcement may have sparked a one-time surge in housing activity. However, there is reason to believe that the underlying factors behind this surge are more sound. For starters, the rate of home building has been below that of household formation. With record-low mortgage rates (thanks to the Fed), greater affordability, and stable prices, homebuyer confidence has returned, and pent-up demand for housing is being absorbed. Many potential buyers who were once leery of entering the market are convinced that prices are not falling further. Even despite sluggish employment growth, we are starting to see an improvement in household formation as younger adults are moving out of rental units and their parentsaEUR(TM) homes. In fact, the number of households grew 2 percent in the U.S. in 2011, the largest gain over the past decade.
Existing home sales are rising at a moderate pace, and new home sales rose 28 percent in August compared to August of last year. While issues such as access to credit still present challenges in achieving a more healthy and sustainable housing market, todayaEUR(TM)s numbers are, at least, an indication that the recovery is under way.