From zerohedge.com
Goldman: "Without The Boost From Housing, Real GDP Growth Would Fall Below 1% This Year"
Submitted by Tyler Durden on 08/13/2013 09:37 -0400
Wonder why the Fed and the banks are so desperate to reflate the second housing bubble, to the delight of flippers and taxpayer consequences (deja vu) be damned? Simple: as Goldman points out in a note released last night, "without the boost from housing, real GDP growth would fall below 1% this year." That's the revised GDP by the way, the one that now includes iTunes song sales and underfunded pension plans in the sumtotal. Which in reality means that ex housing, GDP would almost certainly be negative. So the bigger question is what happens to housing which has already seen a shock to the system following the surge in interest rates in the past month and which hobbled both homebuilders and mortgage applications? This is what Goldman sees there: "On house prices, we have started to see the first signs of deceleration and expect a slowdown from the 10%+ pace observed over the past year. Our bottom-up house price model projects 4-5% annual growth rate in the next two years." Alas, since prices moves from top and bottom inflection point never happen in a straight line as everyone rushes to buy, or sell as the case may be, resulting in a skewed and pronounced move, once the reality seeps in that the artificial housing 'recovery' is over, watch what happens when everyone rushes for the door. That goes for GDP as well.
More from Goldman on housing's contribution to GDP:
How much will housing contribute to GDP growth?
Housing contributes to GDP growth in three ways: (1) the direct effect through residential investment; (2) the consumption impact through housing wealth and active mortgage equity withdrawal (MEW); and (3) the multiplier effect through increases in housing-related employment and easing of bank lending standards in a stronger home price environment. Using the same framework outlined in prior research, we project the contribution of housing to real GDP growth through late 2014.
Read more >>
Goldman: "Without The Boost From Housing, Real GDP Growth Would Fall Below 1% This Year"
Submitted by Tyler Durden on 08/13/2013 09:37 -0400
Wonder why the Fed and the banks are so desperate to reflate the second housing bubble, to the delight of flippers and taxpayer consequences (deja vu) be damned? Simple: as Goldman points out in a note released last night, "without the boost from housing, real GDP growth would fall below 1% this year." That's the revised GDP by the way, the one that now includes iTunes song sales and underfunded pension plans in the sumtotal. Which in reality means that ex housing, GDP would almost certainly be negative. So the bigger question is what happens to housing which has already seen a shock to the system following the surge in interest rates in the past month and which hobbled both homebuilders and mortgage applications? This is what Goldman sees there: "On house prices, we have started to see the first signs of deceleration and expect a slowdown from the 10%+ pace observed over the past year. Our bottom-up house price model projects 4-5% annual growth rate in the next two years." Alas, since prices moves from top and bottom inflection point never happen in a straight line as everyone rushes to buy, or sell as the case may be, resulting in a skewed and pronounced move, once the reality seeps in that the artificial housing 'recovery' is over, watch what happens when everyone rushes for the door. That goes for GDP as well.
More from Goldman on housing's contribution to GDP:
How much will housing contribute to GDP growth?
Housing contributes to GDP growth in three ways: (1) the direct effect through residential investment; (2) the consumption impact through housing wealth and active mortgage equity withdrawal (MEW); and (3) the multiplier effect through increases in housing-related employment and easing of bank lending standards in a stronger home price environment. Using the same framework outlined in prior research, we project the contribution of housing to real GDP growth through late 2014.
Read more >>
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