Real estate improving economy

As many know, the real estate market contributed to the United States’ economic recession five years ago and since then had continued to put downward pressure on its recovery. But now things have turned, and currently the real estate sector is fueling our economy while other economic sectors are not.

Macroeconomic advisers recently projected the U.S. economy will grow at a 1.4% annual rate in the last quarter of this year, with housing accounting for 0.4%. IHS Global Insight is forecasting a 1% growth rate, with housing accounting for 0.53%, which is the largest contribution since 2005.


Be mindful, however, that years of foreclosures and falling prices took their toll on the real estate market nationwide. Many homeowners still have mortgages that exceed the value of their property. Banks are still being very careful about lending money to prospective buyers, but as there is a shortage of new construction, banks should be more inclined to lend to developers given the reduced risk.

Banks are reporting record mortgage profits because of the increased demand for new loans and the refinancing of existing loans. New home-equity lines of credit are projected to increase by 22%, according to Moody’s analytics.

According to S&P/Case-Shiller, home prices increased 3.6% in September. Add that to home prices increasing 7% for the first nine months of this year and this is the healthiest increase since 2005. Plus there are optimistic forecasts for the remainder of this year.

This is a very broad gauge. This study found that 18 of the 20 cities tracked showed year-to-year gains, except for New York and Chicago. Greenwich, being so close to New York, has not seen price gains as well.

Increases in rents and the size of families have increased the need to purchase a home. This demand, in turn, has driven down the inventories of homes to levels of almost a decade ago. The National Association of Realtors reported that sales of existing homes were 11% more than last year’s level.

New home owners are purchasing furnishings, decorations, appliances, electronics and such for their homes and doing renovations on existing homes. Investors are renovating and making required repairs to foreclosed homes. This purchasing activity is increasing retail sales and is positively impacting employment in many areas.

Another result from an improved real estate market is that it increases consumer confidence. Last week, the Conference Board reported the index of confidence increased to 73.7 in November. This is the highest level since February 2008. Currently, the housing market has several advantages, such as low interest rates, relatively reasonable home prices and low inventory levels. How Washington addresses the negotiations over the looming automatic spending cuts and tax increases known as the “fiscal cliff” may impact other sectors more.


Mary Ann Clark is a Realtor with Coldwell Banker at 177 West Putnam Avenue in Greenwich. Questions or comments may be e-mailed to [email protected] or she may be reached directly at 203-249-2244.

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