As foreseen, the U.S. housing market is turning itself around in what might be called an organic economic recovery.
The Obama administration has done its best to bully the market into compliance, kneading it here and prodding it there, but the market, in the end, had to recover on its own. The largest influence in the recent upswing in home prices and the gains in homeowner equity that go along with what have been mostly the product of tight supply in the market -- as opposed to, say, dragging the nation's banks through an opportunistic legal imbroglio, as the Justice Department did in response to the 2010 foreclosure debacle.
That isn't to say the banks didn't deserve a slap on the wrists -- a hard one. It is merely to point out that the banks, in response to the judicial inquiries, pulled back on their foreclosure plans, which slowed the recovery. Maybe it needed to be slowed on moral grounds -- but the recovery slowed down, nonetheless.
In a recent CNNMoney survey of economists, more than 50 percent of respondents indicated they believe the housing market would drive the economic recovery in 2013. Of the remaining respondents, an equal number pointed to consumer spending, cheap energy and assistance from the Federal Reserve as the primary contributors to an economic comeback.
Related
The data on housing is certainly strong. Housing construction starts are up and projected to rise 28 percent more in 2013. Supply is tight, as a bulk of the ground-to-a-halt foreclosures have finally worked their way through the system.
Of course, the Fed has helped. Interest rates on mortgages are rising, but they are still close to historic lows. The Fed has said it will not touch its key interest rate until the unemployment rate drops to 6.5 percent, which allows banks plenty of warning time, given the unemployment rate is currently 7.8 percent and millions of discouraged workers will likely return to the workforce as the unemployment rate drops, which will keep the figure elevated for at least one more year.
Inflation hawks will soon start pounding on podiums and putting pen to paper, writing terse editorials -- writers should be concise when complaining about inflation or they could be guilty of rhetorical inflation. But the Fed would be wise to stay the course, given the lower unemployment rate is an economic false summit at this point.
Economists should also point to increased exports as a solid contributor to gains in the gross domestic product, and much of that is tied to an upswing in energy production.
Increased home equity means revolving loans will perk up in 2013. That also means increased consumer spending.
Economists should also be looking for lessons learned since 2007. How far will the savings rate drop, indicating consumers are getting ahead of themselves again? And how much will a recovery weaken arguments for vigilance?
In international markets Tuesday, the Nikkei 225 index in Japan rose 0.39 percent while the Shanghai composite index in China added 0.53 percent. The Hang Seng index in Hong Kong was flat, sliding 0.07 percent, while the Sensex in India gave up 0.56 percent.
The S&P/ASX 200 in Australia rose 1.11 percent.
In midday trading in Europe, the FTSE 100 index in Britain climbed 0.16 percent while the DAX 30 in Germany dropped 0.12 percent. The CAC 40 in France shed 0.22 percent while the Stoxx Europe 600 was off 0.01 percent.
