The gross domestic product report for the fourth quarter may forecast a slowdown in this part of the housing market going into 2017.
The advanced estimate for GDP showed an increase of 1.9% in the fourth quarter, a slowdown from the third quarter’s increase of 3.5%.
One expert explained that the slowdown in income growth portrayed in the report could worsen the growing home affordability problem in the housing market, and even lock some potential homeowners out of the market.
“Going forward, it’s unlikely that housing will be much of a drag on growth, but Q4 data showed a slowdown in wage and salary growth that could certainly impact housing affordability, particularly as interest rates keep rising,” Zillow Chief Economist Svenja Gudell said. “While there were certainly bright spots in the report, economic growth was slower than expected to close out 2016.”
However, Gudell did explain there were bright spots in the report for housing.
Key takeaway from #GDP release: Residential investment went from a drag on the economy in prior quarters to a big boost in Q4!
— Svenja Gudell (@SvenjaGudell) January 27, 2017
She explained that the increase was direction related to new home sales, a trend that did not continue through the end of the year.
“Residential investment went from a drag on the economy in prior quarters to a big boost in Q4, largely because of strong new home sales in October and November,” Gudell said. “But as we saw earlier this week, new home sales did not continue this momentum in December, and it will be important to see how this data changes as more accurate data is incorporated and further estimates of growth are published.”
And Gudell isn’t the only expert that’s optimistic about the increased spending in residential construction.
“On the positive side, consumers did their part with a near 3% growth in spending and residential construction and modeling spending rose by a solid 10%,” said Lawrence Yun, National Association of Realtors chief economist. “Business spending, after being stuck near zero for a while, kicked higher by 4%.”
In fact, despite the slowdown, Yun remains optimistic about the future of the economy.
“Looking ahead, as long as the real estate sector continues to expand, the economy should avoid a recession,” he said. “Should the animal spirit revive in the business community, a stronger 3% GDP growth should be attainable.”
