Tight Mortgage Lending Seen as Biggest Obstacle to Strong Housing Recovery
Thursday, July 14th, 2011 | No Comments »Housing and the economy won’t stay caught in their current “soft patch” much longer and are slowly headed for higher ground later this year and in 2012 and 2013, but conditions would be considerably brighter if leaders in Washington were adequately addressing what needs to be done to end the housing crisis, Kenneth Rosen, chair of the Fisher Center for Real Estate and Urban Economics at the University of California at Berkeley, told an audience at PCBC on June 22 in San Francisco.
“The recovery is happening,” said Rosen. “It just isn’t as strong as we’d like and housing is the weak link.”
The gross domestic product is likely to grow a subpar 2.4% this year compared to 4.0% “if housing were running on all four cylinders,” he said, and growth is likely to hit 3.0% for 2012, still below the 4% to 5% range that is typical for the early stages of an upturn.
A source of nagging concern for consumers, the job market has a long way to go, he said, with only about 2 million private-sector jobs gained following a loss of 8.8 million during the recession.
Job creation, which slowed down this spring, should be back on track in the fall, he said, and monthly gains this year should average between 175,000 and 200,000, roughly twice the pace of 2010. That would move the unemployment rate down to 8.9% by the end of this year and 8.1% at the close of 2012.
Unfortunately, the construction industry, which accounted for one-fourth of the nation’s job losses in a recession that was three times worse than any that preceded it, won’t be staging a comeback this year, he predicted.
If the economy bounces back in this year’s third and fourth quarters, as he expects, Rosen said that 10-year Treasuries should start moving back toward 4%, from about 3% currently, and subsequently rise into the 4%-5% range and higher.
The Federal Reserve should now be pushing its federal funds interest rate up to 2.5%, from close to zero, he said, noting that the central bank’s current stance is “not helping investors and savers,” who are receiving next to no interest, and is underestimating inflation.
