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Housing Outlook Stays Positive Despite Predicted Moderate Economic Expansion

HandGrabbingHouse [1]The Conference Board’s Leading Economic Index (LEI) [2] declined by two basis points in its latest reading after holding steady in both July and August, but analysts predict that economic growth will still continue but at a moderate pace.

The LEI, a measure of economic developments as an indicator of future trends that tracks a handful of component indicators, including labor market conditions, housing construction activity, and credit conditions, read at 123.3 (2010=100) for September. That reading represented a decline of 0.2 percent after holding steady in both July and August. Still, Ataman Ozyildirim, Director of Business Cycles and Growth Research at The Conference Board, said he expected economic expansion to continue, but at a moderate pace.

“The recent weakness in stock markets, the manufacturing sector and housing permits was offset by gains in financial indicators, and to a lesser extent improvements in consumer expectations and initial claims for unemployment insurance,” Ozyildirim said. “The U.S. economy is on track for moderate growth of about 2.5 percent in the coming quarters, despite the mixed global economic landscape.”

“Along with the good outlook for jobs and household incomes that should be positive for the availability and affordability of housing.”—Ataman Ozyildirim

The predicted moderate economic expansion does not change the Conference Board’s outlook for housing, which is largely positive. Ozyildirim told DS News earlier in the week that, “The single family housing market seems to be heating up, despite some potential volatility. Construction companies and workers are busy while home prices and mortgage rates remain favorable.”

On Thursday, Freddie Mac announced [3] a decline of 3 basis points for 30-year fixed mortgage rates down to 3.79 percent. Also on Thursday, the National Association of Realtors reported that existing-home sales for September [4] had rebounded from August’s decline and have now increased year-over-year for 12 consecutive months.

“That moderate (economic growth) probably means that the interest rates will not pick up significantly soon,” Ozyildirim said. “Along with the good outlook for jobs and household incomes that should be positive for the availability and affordability of housing.”

The LEI report for October comes a month after the Bureau of Economic Analysis [5]’ third estimate for GDP growth for Q2, which exceeded all expectations with reports of 3.9 percent GDP growth. The rate of growth for Q1 was only 0.6 percent.