Housing Predicted to Lift Economy

The housing market should give a boost to the economy this year, coming on the heels of a strong contribution in the final quarter of 2012, according to a new forecast from Freddie Mac.

Freddie Mac is predicting that housing will add in excess of 0.5 percent to GDP this year, with rising sales and prices to go along with strong gains in home construction. Despite continued weakness in the housing market, the lender sees room for sustained growth due to a combination of low home prices and interest rates, along with gradually rising incomes.

Last year marked the first time that housing make a positive contribution to GDP since 2005, according to Freddie Mac, adding a 0.4 percent boost in the fourth quarter of the year to end up with a 0.3 percent contribution for the year as a whole.

22 percent gain in housing starts predicted

Freddie Mac’s February U.S. Economic and Housing Outlook forecasts that total housing starts in 2013 will rise to 950,000 units, a 22 percent increase over 2012. It’s also predicting that rising home values will bring back into the market many homeowners who up until now have been locked into their current properties by negative equity, which will help boost sales.

"Across the nation, most local housing markets have room for sustainable growth, particularly in home construction and sales,” said Frank Nothaft, Freddie Mac chief economist. “As the broader economy heals, expect to see more good news with house prices continuing their recent upward trend, and home sales and housing starts continuing to post strong growth rates.”

Nothaft said a broader recovery in the economy as a whole through 2011 helped stabilize the weakened housing market, and the housing market is now in a position to return the favor by contributing to the growth of GDP.

First published on MortgageLoan.com at: http://www.mortgageloan.com/housing-predicted-lift-economy-9367