America’s housing market has come back to life in the final months of the year, and promises to boost the economy in 2020.
Low mortgage rates, a strong labor market with rising wages and unemployment hitting at a 50-year low are underpinning the solid fundamentals that will help real estate next year.
“The housing market is probably going to be a modest tailwind to the economy,” David Berson, chief economist at Nationwide, told CNN Business.
Housing doesn’t contribute as much to GDP growth as other sectors, but it is an important industry for the economy as a whole. The appetite for buying a home — arguably the single largest purchasing decision one makes in life — is a bellwether for how the consumer is doing. Consumer spending, in turn, makes up some two-thirds of US economic growth.
Mortgage prices fell to three-year lows in the third quarter, and even though they have rebounded slightly, home loans remain more affordable than they used to be.
Consumers also had some time to get used to the impact ofthe 2017 tax reform, which changed the deductibility
“There were changes to the economics of home ownership,” said Michael Gregory, deputy chief economist at BMO. “Particularly if you were in a place with high state and local taxes, or you had a rather large home with a big mortgage, the after-tax cost of owning a home increased.” But the favorable fundamentals for people looking to own a home outweigh the new tax reality: “In some cases incomes are even growing past than home prices,” Gregory said.