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U.S. Outlook: How slow can the housing market go?

Scott Anderson
Chief Economist

Much of the recently released U.S. housing market data has been on the weaker side.

Housing being built on a small hill, with wooden scaffolding surrounding much of it. Lovely sunrise is shining above the horizon.For more on this, see highlights of my report below, followed by a link to the full U.S. Outlook, delivered on August 24.

Key observations:
  • After peaking at 6.7% of GDP in the third quarter of 2006, residential investment as a share of GDP declined for 14 successive quarters, reaching a nadir of 2.4% in the third quarter of 2010.
  • Despite the recent weakness in the housing data, home prices continue to rise, largely due to low inventory.
  • Even though existing home prices have increased year-over-year for 77 consecutive months, prices relative to income are still nowhere near the levels seen just prior to the last housing downturn.
  • Our forecast calls for a continued gradual slowdown in the housing market, which is typical for the late state of an economic expansion.

Read my full report.

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