Housing Was a Huge Headwind; Now It’s a Small Tailwind

October 24th, 2012 at 8:27 am

From the GS research group, a handy chart showing the impact of housing on real GDP growth, broken down into three parts:

–investment in homes, a component of GDP, so this impact is direct;
–the impact of housing wealth on consumer spending;
–the impact of mortgage equity withdrawal on consumer spending.

A few observations:

–housing’s subtractions from GDP during the bust were really large; in ’09 each component was sucking almost of point from GDP growth;

–don’t expect the kind of growth effects from the sector we had in the boom–it was a bubble, and who’d want to go through that again?

–it does sort of look like we lost more in the bust than we gained in the boom, but that’s at least in part because the busts are more concentrated in terms of time relative to the bubble;

–these estimates do not include spillover effects, like the impact on the construction boom on the job market or the impact on bank balance sheets–the latter has, of course, been a big factor in the length of the downturn and the difficulty in pulling out of it; housing busts are particularly pernicious in that regard as banks can “extend and pretend” regarding their valuation of non-performing loans.

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5 comments in reply to "Housing Was a Huge Headwind; Now It’s a Small Tailwind"

  1. save_the_rustbelt says:

    Added note, housing improvements vary greatly by state and by region within each state.

    Any good news welcome, however.


  2. Martin Andelman says:

    How can I get a copy of this GS report? Considering no one has come anywhere close to being even remotely right about anything related to this topic to-date… let’s say consistently and for the last six years… you’ll forgive my reluctance to consider your stated conclusions based on a moderately nice looking chart from GS.

    In fact, and please take this as it’s intended, which is with only great respect, after what you’ve been involved in since 2009, I find it somewhere between surprising and hysterical that you appear to accept it at face value when you must understand that even at best it’s a solid examination of certain data and a reasonable forecast.

    At worst it’s evidence of confirmation bias produced by a group of PhDs… Piling it Higher & Deeper… to be pedaled to politicians that more often than not received triple-digit SAT scores.

    I’m not saying that’s necessarily the case, but surely you realize that even the best mapping of somewhere we’ve yet to travel is imprecise science under ideal circumstances.

    So, is there a copy of this GS report being made available outside of the inner sanctum, or is this the sort of report one has to be a qualified investor to receive?

    Thanks, in advance, for your help…


  3. Renoira says:

    From the September stockholder meeting of PennyMac:

    While it is difficult to forecast with certainty how long the distressed home loan opportunity will last, we expect
    strong close to continue for the next 12 months and probably longer. Our estimates envision a population of
    approximately 15 billion to 20 billion in distressed home loans that have already been identified by marked
    participants is likely to come up for sale.

    So, with all these foreclosures in the lineup, where is all the improvement coming from, do you think?


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