Economic Recovery without the Housing Market?

GlobeandMail of Toronto tells the economic recovery in the U.S. is beginning without help from the housing market. Recovery from economic slumps going back decades meant the real estate market pulled everyone else along, according to columnist Brian Milder. Karl Case, who co-developed the S&P Case/Shiller Index that tracks residential real estate prices in the U.S., says,“The fact that we’re doing it without the housing market is really astounding.” Prof. Case estimates that every dollar spent on a new home generates $1.40 throughout the economy. He says for 30 years the instrument of monetary policy was lower the interest rate to stimulate home building, raise it to stem too fast of growth. Now, he says, “…it’s non-existent. We overbuilt. We overpriced. We’re not producing anything.” The housing sector used to account for six percent of the U.S. economy. It now accounts for two percent. “That’s hundreds of billions of dollars just wiped out,” he adds. Meanwhile, Canadian wood panels producer Norbord Inc., although posting a fourth quarter 2011 loss, sees the U.S. market slowly recovering. Rising materials costs and the weak U.S. housing market hurt their bottom line. Their oriented strand board (OSB) is used for roof sheathing, walls and floors.

(Graphic image: (GlobeandMail)

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