Duke: Housing Should Lift Economy
- Peter KingFebruary 05, 2013 - MortgageLoan.com
A recovering housing market should help drive a continued economic expansion in the year ahead, despite the U.S. economy showing signs of weakness in recent months, according to Elizabeth Duke, a member of the Federal Reserve Board of Governors.
“I’m actually on the optimistic side,” Duke said, during a question and answer session following a speech in Duluth, Ga. “I think there is some momentum building, particularly in the area of housing.”
Duke pointed to factors such as steady increases in home prices, along with rising demand for new home construction as encouraging signs for the economy. Housing has typically been a key factor in bringing the U.S. out of recessions, with the most recent downturn the notable exception to date.
Sees slowdown as temporary
Recent data from the Census Bureau shows the U.S. economy shrank by 0.1 percent in the fourth quarter of 2012, the first decline in over three years. Many analysts attribute that to uncertainty arising from the standoff over the fiscal cliff, which led to reduced federal spending, particularly by the military, as well as to businesses reducing their inventories.
However, Duke noted that other trends continued to show signs of strengthening, including increased consumer spending and easing of restrictions on credit, particularly on auto loans.
“The question really is how much of that momentum in housing, which I expect to continue, will spill over into better consumer confidence, better business confidence,” she said.
Strongest home price gains in six years
New figures released today by the real estate data firm CoreLogic show that U.S. home prices posted their biggest annual gain in over six years as of December, rising 8.3 percent over the previous 12 months. That was the biggest annual increase reported since May 2006, while the 0.4 percent gain from November marked the 10th consecutive monthly increase.
The company is predicting a 7.9 percent increase in overall U.S. home prices in 2013.
The Federal Reserve has been trying to kickstart the economy since early 2009 through a series of moves that have sent mortgage rates on a downward spiral of ever-new record lows, as well as reducing the cost of other credit as well. The moves have driven strong demand for mortgage refinancing, as homeowners sought to take advantage of falling rates, but so far has resulted in only a modest recovery in home purchasing.
Duke is one of seven members of the Federal Reserve Board of Governors, having been appointed in 2008 by then-President George W. Bush.
First published on MortgageLoan.com at: http://www.mortgageloan.com/duke-housing-should-lift-economy-9356
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