Housing Packs Punch for U.S. Growth in 2013 and Beyond – Bloomberg 02-04-13

Salient to Investors:

Climbing home prices are lifting household wealth and boosting the purchasing power of consumers. Declining mortgage delinquencies and foreclosures are giving banks greater leeway to lend. Rising property-tax revenue is alleviating pressure on state and local governments to cut budgets.

Mark Zandi at Moody’s Analytics said the housing recovery will kick into a higher gear as 2013 progresses and juice other parts of the economy. Zandi sees GDP growth of 2 percent in 2013 as rising residential construction will boost add 0.75 percent and offset much of the drag from the fiscal squeeze.

Bloomberg says housing has helped lead the economy out of every recession since 1950 except for last from 2007 to 2009.

James Bullard at the FRB of St. Louis said the psychology has shifted, and good things are happening.

Karl Case, John Quigley and Robert Shiller found that changes in house prices, and in real estate wealth, have a much bigger impact on consumer spending than stock prices and financial wealth. Case says housing has turned from a headwind into a tailwind for the economy – consumption will be boosted $80 billion in 2013 by the recent rise in house prices.

JPMorgan Chase said underwater borrowers fell by almost 4 million in 2012 to 7 million, and could drop to 4 million within 2 years.

Michael Feroli at JPMorgan Chase said banks are benefiting as loan delinquencies and foreclosures decline and add as much as 0.4 percent to GDP in 2014.

Markit said credit-default swaps are the cheapest since July 2011.

Carl Riccadonna at Deutsche Bank Securities said housing could be a major story this year: the housing recovery is gaining momentum and the sector has worked off its excesses.

Michelle Meyer at Bank of America expects property values to increase 4.7 percent in 2013, 7.7 percent in 2014, and 5.2 percent in 2015, while the ripple effects will accelerate in 2013.

Read the full article at http://www.bloomberg.com/news/2013-02-04/housing-packs-punch-for-u-s-growth-in-2013-and-beyond.html

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