Climbing home prices are lifting household wealth and boosting the purchasing power of consumers. Declining mortgage delinquencies and foreclosures are buttressing bank balance sheets, giving them greater leeway to lend. And rising property- tax revenue is fortifying the finances of state and local governments, alleviating pressure on them to cut budgets.
“The housing recovery will kick into a higher gear as the year progresses,” said Mark Zandi, chief economist in West Chester, Pennsylvania, for Moody’s Analytics Inc. “We’re going to get a lot of juice from the channels” through which it affects other parts of the economy.
The spreading impact of housing will help the economy weather looming federal government spending cuts and tax increases and keep on growing. Rising residential construction and its knock-on economic effects will boost gross domestic product by about 0.75 percentage point this year, offsetting much of the drag from the fiscal squeeze, according to Zandi. He sees GDP growing at about 2 percent again this year.
Elsewhere, increasing political tension in Europe caused stocks to fall there and in the U.S. The Standard & Poor’s 500 Index decreased 0.7 percent to 1,502.34 at 10:55 a.m. in New York. The Stoxx Europe 600 Index slid 1.2 percent.
A report from the Commerce Department showed U.S. factory orders rose less than forecast in December, reflecting a drop in non-durable goods that partly countered gains in construction equipment and computers.