According to a Sunday report by Reuters, there appears to be a glimmer of hope for the U.S housing market. For the first time since 2005, there could be slight growth in residential construction next year, which could make a modest contribution to GDP growth for 2012. While this isn’t expected to significantly propel the economy, it hints at a gradual improvement.
Several core factors were identified by analysts that suggest a potential upturn in the housing market. Notably, the stock of new homes has hit a low of 162,000 properties. If demand rises, we could see a supply crunch next year. Additionally, the backlog of unsold homes seems to be decreasing, which could lend further buoyancy to the market.
Signs of increasing optimism are also being reflected in the sentiment of the National Association of Home Builders. Their index has risen by more than 20% in the last quarter, pointing towards a positive outlook. Moreover, mortgage lenders have slightly relaxed their down payment requirements, potentially encouraging more people to enter the market.
The construction of rental units is also on an upward trend, expected to continue into 2012. However, for the economy to fully rebound, other elements also need to fall into place, including a robust jobs market, solid income growth, and an overall positive economic trajectory. At present, personal income is struggling to keep pace with inflation. Without these key supporting factors, the housing market may remain subdued, despite lower mortgage rates and weakened down payment requirements.
