In the latest installment of its “Ask The Economist” series, DS News asked Realtor.com Chief Economist Jonathan Smoke to share his thoughts on the current state of the U.S. economy and housing industry. According to Mr. Smoke:
Housing and the economy are finally in a supportive, virtuous cycle again. The economic growth we’ve seen over the last two years has provided the context for the healthy growth in home sales and the recovery of prices we have experienced this year. Higher prices are a result of surging demand with tight supply, which is finally resulting in more growth in single-family construction. Historically, new construction and housing services contribute 18 percent of the US economy. That contribution has been lower while new construction was depressed and while the housing sector worked through the distress brought on by the foreclosure crisis. Housing’s contribution is on the rise again, just in time to offset the drag from lower oil production and lower exports caused by the strong dollar.
More job creation, higher consumer confidence, and an increasing pace of household formation all lead to more demand for housing, keeping that virtuous cycle going.
