Housing Boom Expected to Lead Economic Recovery

Real Estate Agent with California Lifestyle Realty BRE # 01277445

The U.S. economy is poised for growth, and the housing market is set to lead the way, according to a new report by Pacific Investment Management Co. (PIMCO). In PIMCO’s quarterly economic outlook, portfolio manager Saumil Parikh said early signs of improvement in the housing market are expected to lead a full economic recovery over the next three to five years.

Coupled with the nascent improvement of the housing market, the shift towards domestic energy supply could boost the country’s economic growth by half a percentage point beyond its current 2 percent annual rate, said Parikh.

“However, the U.S. economy still faces significant headwinds from over-indebtedness, large imbalances, growing inequality and policy incrementalism – and these headwinds could hinder employment growth,” Parikh cautioned.

IMF Forecasts

The International Monetary Fund (IMF) forecasts the U.S. economy to grow 2 percent in 2012, and 2.3 percent in the following year. IMF also warned that the economy could fall into recession, should the White House and Congress fall off the “fiscal cliff,” a package of spending cuts and tax increases scheduled to take effect if the two political bodies can’t reach a budget agreement by the end of the year.

The unemployment rate may fall to 8.2 percent this year and 7.9 percent the following year, according to IMF estimates. Continued job growth combined with a healing housing market may not be a panacea, but it will certainly bolster the economy, making it easier for Americans to purchase and afford homes.

Contracts to purchase homes and building permits to construct new homes continue to rise, exceeding economists' expectations. In May, more Americans filed documents to purchase previously owned homes than expected. Pending home resales, an index for the overall health of the housing market, surged 5.9 percent, reaching a two-year high. According to the National Association of Realtors (NAR), a sale is considered pending when the contract is signed but the transaction has not closed.

A Sustainable Recovery

Looking beyond just the monthly gains, Lawrence Yun, chief economist for the NAR, said the increase in pending home resales in May marks the thirteenth consecutive month of gains. “This implies that the recovery is a sustainable recovery. The overall trend is an increase and buyers are coming back to the market,” Yun said.

The prediction for 2012 is that sales of existing homes will increase between 9 and 10 percent, according to Yun. Regionally, the pending home sales index increased most in the West, jumping 14.5 percent in May. The Northeast index rose 4.8 percent, while the South increased just 1.1 percent. The Midwest index grew by 6.3 percent. In each of these regions, sales have increased dramatically since this time last year.

Values of homes are expected to rise through 2013 as inventory shrinks and demand for homes increases. For homebuyers, the current market is extremely favorable, with record-low mortgage rates and low home prices.

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Mary Williams, Realtor
California Lifestyle Realty
BRE# 01277445
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Mike Schneider
10 YRS with Active Rain ! - Lake in the Hills, IL

This a loaded post...lots of info. It all sounds so promising......but i see, # of foreclosures rising, short sales rising...yes, here in Chicago...we're experiencing increased activity. I dont see any value appreciation...i see continuous "value decline" and many cash investors purchasing at rock bottom values... I see BOA sitting/ stalling/ their process so patient buyers transist into impatient buyers withdrawing their offers...thus starting all over again...I see Freddie approving short sales, but PMI rejecting them, thus pushing able buyers to withdraw.

Unemployment is the key in my opinion. Illinois is one of the most difficult states for new industry to migrate to...due to tax rates. Wisconsin, Iowa and Indiana are all much healthier than Illinois. I would predict healthier real estate market recovery in those states where they know what theyre doing....etc

thanks for sharing...ill read it a few times..to absorb all the info.

Markets as we all understand are "localized"//////

Jul 19, 2012 02:02 AM #1
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