On the heels of the bad news that the U.S. economy expanded at an annual rate of only 1.5 percent from April through June, there’s this observation from The Wall Street Journal today: housing is finally contributing to economic growth.
The housing bubble is a large part of what got the U.S. into its economic mess, and the sector hasn’t done its usual duty of leading the way toward recovery. But it did add .22 percent to GDP in the second quarter, and .43 percent in the first quarter, the WSJ says.
We have seen evidence of this turnaround here in Idaho. As the Brookings Metro Monitor showed earlier this month, no major U.S. city had seen more home price improvement than Boise as of the first three months of this year.
As the WSJ points out, though, this isn’t a purely good-news story. Here’s why:
[E]ven if new home construction and renovation is picking up, housing will still drag on the economy in an important way: households have high mortgage debt and many may feel “house poor” and therefore are not inclined to spend very much. Home values are down by $7 trillion from their 2006 peak, and more than 11 million Americans owe about $700 billion more than their homes are worth. – The Wall Street Journal
This holds true in Boise, too. Here, the fall in home prices was especially steep. Local prices may be up by more than four percent from their low point, but they remain more than 40 percent below their 2006 peak.