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US upbeat about recovery

20 August 2009 Reporter

Economists now believe that the US housing market is poised for recovery.

Single family housing starts rose 1.7 per cent in July, the US census Bureau reported yesterday, a positive sign that overflowing home inventories are dropping and demand for new homes is picking up.

According to a report in the Australian Financial Review, JP Morgan Chase economist Abiel Reinhart said the company’s forecast that residential investment would rise at an annual pace of 10 per cent in the quarter may turn out to be too low, given single family starts appear to be rising at a sharp pace on an annualised basis.

Economists are confident that residential investment will contribute to economic growth this quarter for the first time in more than three years.

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Over the past year, the US government has tried to stimulate first home buyers, mitigate foreclosures and encourage banks to modify loans, while some state governments have placed moratoria on foreclosures.

The US Federal Reserve has cut interest rates to nearly zero and purchased government bonds and mortgage securities in an effort to bring down interest rates as low as possible, however until now, it only had limited signs of success.

US upbeat about recovery
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