“After achieving the longest economic expansion in the U.S. history and growing a solid 3.2% annualized rate in the first quarter of 2019, which way is the $19 trillion income-generating economy headed?” Yun asks. “Not as strong.”
According to Yun, “constant trade war rhetoric” has had a negative impact on businesses as equipment spending drops. Real estate, he states, is a key area for future growth.
The housing shortage has presented a critical need to build homes, especially among moderately priced homes where demand is strongest.
“Rising home sales and increased housing starts have nearly always been associated with economic expansion,” said Yun. “More home sales also mean increased number of Americans who can participate in wealth gains. Consequently, consumer spending, including vehicle sales, can turn higher.”
According to a CoreLogic special report, titled “The Role of Housing in the Longest Economic Expansion,” in July 2019, the United States’ economic expansion reached 121 months. The economy has continued to grow since the recession ended in 2009, and with housing comprising approximately 15% of GDP since 2010, the real estate market is an important indicator of economic health.
“During the last nine years, the expansion has created more than 20 million jobs, raised family incomes and rebuilt consumer confidence,” said CoreLogic Chief Economist Frank Nothaft. “The longest stretch of mortgage rates below 5% in more than 60 years has supplemented these factors. These economic forces have driven a recovery in home sales, construction, prices and home equity wealth.”
Another contribution to economic growth has been government spending. Yun points to high revenues from the growing economy and rising property values and rising property taxes, influencing state and local government to spend more.
Internationally, U.S. exports rose and imports fell, thereby shrinking the trade deficit.
“One caution is that slower activity of exports and imports have in the past correlated with a slowing economy,” said Yun. “If businesses cannot operate in the most efficient manner as they see fit, then the economy slows.”