One of the most bullish economic stories in the world has been the recent recovery of the U.S. housing market.Maury Harris, UBS’s Chief U.S. Economist, is particularly optimistic considering the snapback of housing formation, which is now back above 1 million per year.
Harris pointed to one housing market “wildcard”: investor interest.
During the heyday of the housing bubble, investors had accounted for a whopping 25-30 per cent of the housing market.
Harris thinks that the incentive to enter the housing market as an investor is pretty high these days because of the low interest rate environment, which he thanks the Fed for.
You see, as seasoned bonds mature, investors are finding themselves in an unattractive low interest environment.
But one area that’s offering attractive income today is the home rental market. And with low borrowing rates, landlords are netting big profits.
“As rents have risen versus home buying costs, the ‘landlord ownership rate’ has increased,” said Harris.
With the Fed expecting to keep interest rates low through at least 2015, investor interest in the housing market could come back in a big way, which in turn could prove bullish for the economy.
Harris expects US GDP to grow 2.3 per cent in 2013, which is higher than the consensus.
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