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NPR Overly Optimistic on Housing Rebound

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Thursday, 22 August 2013 05:28

Morning Edition had a segment on the housing recovery which substantially overstated its likely contribution to the recovery. The expert analyst the piece relied upon suggested that housing construction could add 1.0 percentage point to GDP growth over the next three years. This would imply a near doubling of its contribution over the last year.

According to data from the Bureau of Economic Analysis, housing has added an average of just less than 0.4 percentage points to growth over the last four quarters. Its peak contribution in this period was just 0.5 percentage points. Even assuming a multiplier of 1.5, the average contribution over this period would be just 0.6 percentage points, considerably less than the 1.0 percentage point suggested by NPR's expert.

It is also remarkable that the piece never referred to the vacancy rate which is still near record highs. This is a key factor holding housing starts down.

Comments (3)Add Comment
Housing Bubble?
written by JayR, August 22, 2013 7:35
Why, on a post about housing contributions to our overall economy, is there no mention that it looks like we are creating a new housing bubble? This seems like talking about how much a person is going to contribute to society and forgetting to mention that the person has terminal cancer.
...
written by PeonInChief, August 22, 2013 11:43
They don't mention vacancy rate because vacancy rate has little to do with the cost of housing. Median income is far more predictive of rent levels. It's a "what percentage of their income can we get out of people who have no options and few legal rights." Indeed rents are rising most rapidly in the South, where tenants' rights are weaker than they are in the rest of the country.
Not a Rebound but a Bubble
written by rrose, August 22, 2013 8:07
Considering that interest rates are at historic lows and that low interest rates drove the last housing bubble, it seems that rebound is a bad term.

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About Beat the Press

Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.

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