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Now that the overall economy is on more solid ground, Wells Fargo economists suggest that housing may soon follow in its footsteps, according to Wells Fargo's Housing Chartbook for October 2014. The second quarter real GDP growth was recently revised to a higher annualized rate of 4.6 percent, and the unemployment rate has fallen below 6 percent for the first time since 2008. Data on consumer spending and employment for the third quarter suggests that the economy will close out 2014 on a high note. The economists indicated in the report that they believe real GDP growth will average 3 percent per annum for the next two years.
While some predict that the housing market is poised for more rentals than buys for years to come, particularly among millennials, Wells Fargo suggests the contrary. Because foreclosures, delinquencies, and mortgages in a negative equity position have all been steadily declining over the last few years, Wells Fargo economists predict that home sales will improve and the demand for mortgages will revive once households are more confident about income and employment. New home sales saw an 18 percent increase nationwide in August, sending them to their highest level since 2008.
Consumer spending indicators rose for a second straight month in September as the labor market showed signs of improvement. Deloitte released the results of its latest monthly Consumer Spending Index, which climbed in September to 4.21 from an August reading of 4.11. The index tracks consumer cash flow through a handful of measures—tax burden, initial unemployment claims, real wages, and new home prices—as an indicator of future consumer spending. Out of those four gauges, only one improved: Real hourly wages were up 0.5 percent from August to $8.86 in September.
