Jeremy Siegel: Housing Will Provide A Huge Boost To The Economy For The Rest Of The Year

Jeremy Siegel

Photo: Bloomberg TV

At first there was much celebration about a housing bottom after home prices increased, inventory declined and demand seemed to be picking up.Last week however saw new home sales and pending home sales decline, and brought out bears poking in holes in the housing recovery story.

But Wharton professor Jeremy Siegel is bullish as ever. He told Bloomberg TV that housing is a bright spot in the economy that is important for psychology and spending, and that will drive GDP growth in the second half of the year:

“Housing is one of the few bright spots, but a very important bright spot in the economy. When you talk about all consumer spending  and even in the investment category almost 25 – 30 per cent is related to housing – furniture purchases, redecoration, renovation, the feeling of consumers that they’ve got a little bit of equity in t heir home. We’ve had some stabilisation of prices… Case Shiller has shown house prices creeping up, that is so important for psychology and also for spending.

It’s going to increase consumer sentiment and business sentiment. You know we had a housing depression, for the first 50 years 1947 all the way up to 2006 average housing starts were at 1.5 million and that’s what the experts say we need for the growing population a nd household formation. It slipped down to 475,000 unbelievable, it is now up back to 700,000 only half that level, so we have just to get back to replacement we have a tremendous upside in that housing market.

And I think that that is going to be the market that’s going to stabilise the sentiment, improve the sentiment, and drive us to GDP in the second half of the year that’s closer to 3 per cent than it has been to 1.5 and 2 per cent in the first half of this year.

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