Housing Could Prolong The U.S. Recovery

摘要

There's a big reason to believe that the U.S. economy will be able to withstand a hike in interest rates by the Federal Reserve: Pent-up demand in housing is high and the U.S. economy isn't likely to run out of steam until that demand is met. Going back to the 1940s, the U.S. central bank has never embarked on a cycle of higher rates with housing having so much room to run. The severity of the housing bust has kept home construction at modest levels, even as the last recession slips further into the past. Although housing construction is expanding at its fastest rate since 2007, it accounted for just 3.3 percent of gross domestic product through the second quarter, well below its average of 4.6 percent, says David Doyle, an analyst at the Macquarie Group. "Business cycle expansions are likely when residential investment is low as a share of GDP," he wrote in a recent report. "Recessions typically only transpire when residential investment becomes elevated as a share of GDP."