Let’s focus on housing since that’s the clearest example. Housing market activity and single-family housing suffered a deep chill in the second quarter of 2022 as rising prices and higher mortgage rates squeezed affordability. Between last year’s second and fourth quarters, the decline in residential investment pulled GDP down more than 1% on average per quarter.
Yet in the Consumer Price Index data, housing inflation was picking up during that time. That’s because housing costs are calculated on the monthly payment determined when a lease is signed — usually once a year. But the market rate for rents fluctuates throughout the year. So housing can still show up in the inflation data as a contributor to higher prices even as rents are falling.
A year later, the situation has reversed. Demand for new construction is up, in part due to the shortage of existing homes for sale. Lennar Corp., the second-largest US homebuilder, said in its earnings report last week that it expects more new orders and deliveries next quarter than it previously anticipated. It’s increasing production to match demand. Housing will probably be a positive contributor to GDP growth in the second or third quarter of 2023 for the first time since the first quarter of 2021.
Loading…
Source: www.washingtonpost.com
ENB
Sandstone Group
