US housing sector could boost GDP growth

Subject

The impact of the housing sector on US growth.

Significance

After being 'missing in action' for about eight years, the US housing sector is finally showing signs that it may be poised for acceleration. New home sales for May showed their strongest pace of sales since February 2008, while housing permit data revealed a near eight-year high in new authorisations. This indicates that the overall economy will benefit as the glut in pre-recession housing works through the system and the population returns to earlier trends.

Impacts

• Higher savings from low oil prices could be spent in the housing market, as they have not translated to a significant consumption boost.
• A new housing bubble is not likely, as credit conditions remain tighter than before the 2008 financial crisis.
• If housing contributes to stronger GDP recovery, the Federal Reserve could accelerate the pace of rate hikes.