|Economy and Housing Gain Some Traction But Still Could Slip|
Some positive news in recent weeks suggests the economy and
housing demand may be gaining some traction after a year of just limping along.
In the advance estimate for the third quarter, gross domestic
product accelerated to 2.5% — up from 0.4% and 1.3% in the first and second
The Federal Open Market Committee attributed the
acceleration to “the reversal of temporary factors” restraining growth earlier
in the year. However, there are many other factors that could still derail the
The labor market remains weak, with the addition of 80,000
jobs in October. While revisions added more than 100,000 jobs to August-September
estimates, this year’s monthly job creation averaged a sluggish 125,000 through
October. This falls below the pace needed to keep pace with growth in the size
of the labor force, leaving unemployment stubbornly high at 9.0%.
On the housing front, the NAHB/First American Improving
Market Index showed continued expansion in November, with 30 metro areas on the
list; the third-quarter homeownership rate ticked up to 66.1%, the first
increase since 2008; and private residential construction spending rose in
However, pending home sales continued to drift down, suggesting
little improvement for existing home sales over the next few months; and NAHB’s
remodeling market index faltered again in the third quarter, after reaching a four-year
high in the first quarter.
Also raising concern, several gypsum producers announced
plans to increase prices in early 2012, some by as much as 35%. NAHB estimates
this would add up to $600 to the cost of building a median-priced house.
The ongoing housing crisis is likely to have a long-term
impact on demographics. Household formations have been delayed, and new NAHB
research shows that marriages and having children are also being delayed, leading
to a marked decline in fertility rates among women in their 20s and 30s.