Wharton Professor and author Jeremy Siegel says a rebound in the housing market will help push GDP growth near 3% in the second half of 2012.
“Housing is one of the few bright spots, but a very important bright spot in the economy,” Siegel told Bloomberg TV (hat tip to Business Insider). “When you talk about all consumer spending, and even in the investment category almost 25-30 percent is related to housing/furniture purchases, redecoration, renovation — the feeling of consumers that they’ve got a little bit of equity in their home. We’ve had some stabilization of prices … Case-Shiller has shown house prices creeping up; that is so important for psychology and also for spending.”
Siegel says that will increase consumer and business sentiment. He notes that housing starts need to be around 1.5 million per month, and fell to 475,000 during the housing crisis. Now they’re back up to 700,000. “We have a tremendous upside in that housing market,” Siegel said. “And I think that that is going to be the market that’s going to stabilize the sentiment, improve the sentiment, and drive us to GDP in the second half of the year that’s closer to 3 percent than … to [the] 1.5 and 2 percent [it has been] in the first half of this year.”