Home / Housing / Why The Housing Sector Won’t Save The Broader Economy
Print Friendly and PDF

Why The Housing Sector Won’t Save The Broader Economy

Posted on April 26, 2014

The housing sector may or may not get better after a slow start to 2014.

But regardless, it certainly won’t save the broader economy — at least not according to two professors who run a popular economics blog.

On House of Debt, Princeton’s Atif Mian and University of Chicago Booth School of Business’s Amir Sufi say, bluntly, “housing won’t save the U.S. economy.”

They point out that house-price growth during the last two years was actually a bit better than between 2004 and 2006. But cash-out refinancing volume is way down, as is the building of new units.

Their commentary follows new-home sales data that was released Wednesday.

“Dreadful new home sales data yesterday heightened concerns that house-price growth will stall, but we are making a different point: the sensitivity of economic activity to rising house prices is much lower today than it was prior to the Great Recession,” they say. “This is due to a number of factors, such as the rise in investor purchases and the fact that the households who would be most likely to spend out of housing wealth are no longer homeowners.”

In an interview with MarketWatch, former Treasury Secretary Larry Summers made a similar point about the lack of oomph in housing.

“I think the pendulum has swung too far. There were obvious excesses in the excessive provision of credit for housing in the years before the financial crisis. I think now credit is insufficiently available for the purchase of houses,” he said.

Continue Reading on blogs.marketwatch.com

Print Friendly and PDF

Posting Policy:
We have no tolerance for comments containing violence, racism, vulgarity, profanity, all caps, or discourteous behavior. Thank you for partnering with us to maintain a courteous and useful public environment where we can engage in reasonable discourse. Read more.

One thought on “Why The Housing Sector Won’t Save The Broader Economy

  1. peleus212 says:

    Housing should not be depended on to bring back the economy, that is lower taxes, reduce regulations, and let companies create jobs. My main concern is if the housing does not improve they [Gov] is going to reduce all the checks and balances. If you have respitory function you can buy a house, no money, no job, no matter and …….. here we go again