August 10, 2018 by Korene Clopine-Seaman
Positive economic growth numbers are always cause for celebration and the second quarter GDP just went vertical. After nearly four years of sub-par growth, the real GDP hit 4.1 percent in the second quarter.
While that economic news has everyday Americans excited that we may be entering a new age of prosperity, drawing a concrete link to the real estate market may be difficult. But by looking long and hard at this uptick and its potential impact on housing, you may get a better idea about buying, selling or standing pat on residential and commercial property.
GDP Report Points To Demand
Among the positive measures from the recent economic report, consumption enjoyed a positive increase. The first quarter numbers were disappointingly sluggish in this area at a modest 0.5 percent. The second quarter took off like a rocket, by comparison, at 2.25 percent.
Although that figure shows an upwardly mobile economy, some experts are calling it discouraging given the extraordinary consumer confidence that has risen to record highs of more than 101.0 since November 2017. This opinion begs the question: why are economy gurus disappointed?
The first part of that answer has to do with the implementation of the Tax Cuts and Jobs Act that is putting more money in American paychecks and rolled back income tax liability. Many economists forecast that this personal wealth growth would turn into solid consumption. While working families have enjoyed a breather in terms of scratching from paycheck to paycheck, home purchases have not gone through the roof.
Home availability remains relatively low. With Millennials scooping up many of the starter-home listings and Baby Boomers downsizing, a significant housing shortfall exists. If you have ever heard the term “seller’s market,” this is it.
Inventory Shortage Means Buy Quickly
There are always naysayers that point to lower than expected consumption and claim the economy is weak. The facts in the GDP report clearly dispute any such ideas.
Business investment spiked to a powerful 11.5 percent and then 7.3 percent in the first two quarters. Fixed business investment is on fire based on deregulation, soaring profits and confidence.
That’s why real estate resources are saying that the only thing holding the market back is inventory. Home sale data is not keeping pace with other sectors of the economy because there simply is not enough inventory to keep up with demand. For first-time buyers, this means get prequalified and act swiftly if you find a dream home. It won’t stay on the market long.
Prospective homebuyers may be relieved to know that positive construction indicators are trending. New homes are expected to improve the inventory shortage heading into 2019. Still, demand is likely to stay ahead of inventory.
Editor’s note: If you are thinking about a HECM Reverse Mortgage to draw some cash out of your home equity, you may be favored with a higher appraisal resulting in a larger cash benefit. The fact that you will get rid of a mortgage payment may be enough to take the bait now. You can discuss this with your HECM lender. That would be Warren Strycker for Patriot Lending. Contact and credential information can be found on the information tab on the home page. Call 928 345-1200 with your questions.