The Morning Economic Report
5:30 am
Thu May 8, 2014

Housing Downturn - 5/8/14

The housing downturn that became increasingly apparent by 2006 and then worsened considerably thereafter arguably represents the primary contributor to the 2007-2008-2009 recession.  During the early years of recovery, the housing market helped to pace the economic expansion, driven in large measure by a combination of bargain basement prices and record low mortgage rates. 

But more recently, the housing market has been stalling again, with investment in residential property intended for owner occupancy no longer significantly contributing to growth.  According to writer Neil Irwin, investment in residential property remains a smaller share of the overall economy than at any time since World War II.  If building activity were merely to return to its postwar average share of economic activity, economic growth in 2014 would jump to a 1990's like level of 4 percent, up from today’s roughly 2 percent plus action.  

Additional building, renovating and selling of homes would add about 1.5 million jobs and shave roughly a percentage point off the nation’s unemployment rate, now 6.7 percent.