Housing rebound continuing; still lots of room to grow
One of the best news stories of the past year has been the recovery in the housing market. Home prices were up 8.2% and residential investment rose 15% in 2012.
"This is only the beginning. At the current pace of 890,000 (seasonally adjusted annual rate) reached in January, housing starts are still 40% off their long-run level," says Alexander. "Going forward, residential investment is likely to directly add 0.4 percentage points to growth in 2013 and 0.5 percentage points in 2014. Just as important, construction jobs are likely to add around 30,000 to monthly payrolls over the next two years."
The Federal Reserve to remain supportive through 2013
In an environment of sub-2% real GDP growth, the Federal Reserve is likely to continue its current program of
in monthly asset purchases at least through the end of 2013. This will help keep a lid on interest rates and support the recovery in the housing market.
"With the public sector turning towards deficit reduction, prospects for faster economic growth depend on re-leveraging in the private sector," notes Alexander. "Fortunately, with the recovery in housing gaining speed, this rotation is taking place and is set to accelerate in the years ahead."
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