When the Federal Reserve began talking about scaling back its massive stimulus program this summer, the markets freaked out. But Americans? Not so much.
The Fed has been buying billions of dollars in long-term bonds each month to push down long-term interest rates and boost the housing market. The hint that the Fed might start winding down that program helped drive mortgage rates up an entire percentage point in 2013 a spike that some worried could damage the sector.
Optimism is again swirling that the economy is finally, finally, finally set to break out of its recovery doldrums and into a year next year, but still! of strongish growth. You'd be forgiven for not buying it yet. We've heard this fast-growth-is-right-around-the-corner song before, and there's a decent case that it won't end any differently this time around.
A housing comeback is now underway; that much is clear. Adding to a steady drumbeat of positive data for the sector, new data on Tuesday showed a surprising 3.6 percent gain in housing starts in October, which came on the back of a 15.1 percent rise in September.
The question now is how strong it will be and where it will take place. And to answer those questions it helps to look into the fundamentals of the major U.S. housing markets. These numbers suggest the future for housing is looking bright in the Atlanta, New York, and Chicago metro areas. But that's getting ahead of things.
by Steven Pearlstein
In case you haven’t noticed, the economy is actually getting better. Noticeably better.
Yes, it’s been painfully slow in coming, as we continue to tack against strong headwinds coming from Europe and the Middle East as well as the strong ebb tide created by the wind-down of fiscal stimulus. And certainly the recovery has been halting and uneven.
The data points for this optimism are to be found in recent reports on private payrolls (averaging just under 200,000 jobs per month for the past year), gross domestic product (growing at an annual rate of 3 percent), consumer confidence (as high as its been since 2008) and income (up 5 percent in the past year before adjusting for inflation).
On Wall Street, the Dow is at its highest point in nearly four years and Nasdaq at its highest point in a decade, reflecting both record profits and renewed investor confidence. Federal and state tax revenues are beginning to come in better than projected and households are continuing to whittle down their debt, with a savings rate of 4.5 percent. There are even enough green shoots in the housing market to suggest that residential construction might contribute to GDP growth this year rather than subtract from it. Revisions of government data are now reliably up rather than down.
And yet, there are those on the Republican right and the Democratic left who have so much invested in a bad economy that they are reluctant to acknowledge any of this good news.
This is, I think, a mostly useless exercise. Obama and Reagan presided over different kinds of recessions that began at different times and ended in different ways. Imagine you had two doctors, one who had treated a patient for a drug overdose, and another who was treating a patient who recently suffered a heart attack. Would flatly comparing the speed of the two patients’ recoveries tell you anything about the doctors? Of course not. So too with Obama and Reagan. But if you do want to compare the two presidents, here are some things to keep in mind: