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TheStreet Open House

US Economy Gets Lift From Housing, Other Tailwinds

By CHRISTOPHER S. RUGABER

WASHINGTON (AP) â¿¿ The U.S. economy is a study in contrasts.

The housing, banking and auto industries are surging back to health and that has helped push the stock market to a five-year peak. Higher prices for homes and stocks tend to make people feel wealthier and spend more.

Yet unemployment remains high and hiring modest. The end of a Social Security tax cut is shrinking already flat pay. Federal budget fights have put businesses and consumers on edge.

Balanced between those tailwinds and headwinds, the economy is struggling to accelerate. By the end of this year, though, many analysts think the tailwinds will succeed in boosting growth and fueling a more robust economy in 2014.

"There is some underlying momentum," says Paul Edelstein, U.S. economist at IHS Global Insight. "It's not as strong as we would like, but it's there and it's building."

Uncertainty about government spending cuts could be defused by summer, and any spending cuts that do take effect will likely be phased in over several years. Also, for the first time since the recession ended 3½ years ago, several key areas of the economy are simultaneously driving growth, which means the strength is more broadly based:

â¿¿ HOUSING

The nation has finally worked off the excesses of the housing bubble. Once there were too many homes for sale; now, there are too few to meet demand. That is pushing up home prices, construction and hiring â¿¿ trends that could accelerate U.S. economic growth in 2013 by a full percentage point, economists say.

Home prices rose 7.4 percent in the 12 months that ended in November, according to CoreLogic. It was the largest 12-month gain in six years.

Housing starts will reach 970,000 this year, according to Patrick Newport, an economist at IHS, a 24 percent jump from 2012. That's far above the 554,000 homes started in 2009 after the housing bust, though still below the roughly 1.5 million associated with a healthy market.

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