Last week, I noted several areas of the economy that could act like "coiled springs" -- economic ares that could provide strong growth going forward, given the right impetus. I've already covered consumer spending. A second is is the new homes market. Here are the details:
The total inventory of new homes for sale is at the lowest level in a generation. This means that a marked increase in demand for new homes would lead to a big increase in new home construction, which would be a tremendous boost to the economy. This would increase construction employment -- a truly terrible part of the job market right now -- and also increase durable goods purchases (appliances and furniture). In short, a big increase in new home construction would be a big help to the economy.
And -- the elements of a surge in new homes sales are in place.
Housing affordability is at incredible levels right now as well -- meaning this is really a great time to buy a home.
Consumers are also in better shape to purchase a home.
Consumers have been cutting back on their total mortgage debt which has led to
A much better financial obligations ratio. In addition,
Consumers have been saving more money so they can put more money down.
In short, the new home sales market is ready for a sharp turnaround. The real question is what would spark that move in the economy? The answer -- as with consumer spending -- is jobs. Consumers need a sign from the economy that the worst is over. And the best sign of that would be 3-5 months of strong job gains. Until we get that, we're treading water.
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