How housing could lead to economic recovery

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How housing could lead to economic recovery

By HBSDealer Staff - 06/02/2020
Industry organizations are making the argument that housing could be close helping lead the economy out of recession levels.

According to Robert Dietz, chief economist of the National Association of Home Builders, the housing sector entered this recession underbuilt. Built-up demand and low interest rates positions housing toward a path of quick recovery compared to other sectors of the economy.

Daniel McCue, senior research analyst at the Joint Center for Housing Studies of Harvard University (JCHS), points to the mandatory halting of non-essential residential construction as the COVID-19 crisis expanded.The slowdown in the pace of residential construction, lead to even more under-building that could result in a rapid supply response once restrictions are eased and lifted.

Despite limitations forced on residential construction in recent months, sales of new single-family houses in April edged upward 0.6% to a seasonally adjusted rate of 623,000. The NAHB had expected a 20% decline. 

Recessions have traditionally resulted in lower interest rates, making borrowing more attractive to potential home buyers and home builders, McCue notes. The cycle could lead to jump in home building. 

Dietz points to recent data from the Mortgage Bankers Association, which found a 9% week-over-week gain, with a 54% improvement since early April and standing at the highest level since mid-March.

But momentum in the market will depend on the labor market. Dietz notes that weekly jobless claims recently declined from 24.9 million to 21 million, which could be caused by renewed hiring. A rise in construction hiring could also be a catalyst for expanded home building.