Will the slowing economy impact the U.S. housing market?

July 31, 2012 09:00AM

Recent data has sparked growing belief that the housing market is recovering, but according to Bloomberg News, the economy is faltering, and for a third consecutive year that could slow momentum in the housing market.

Housing starts increased by 4.7 percent in June, and home builder confidence grew at the fastest clip in nearly a decade, according to the National Association of Home Builders. Meanwhile, the National Association of Realtors reported that home affordability reached a record high earlier this year.

But growth in spending on home construction and remodeling slowed in the second quarter — along with consumer confidence and job growth — after a strong first quarter.

Further, sales of homes have slowed. Though that appears to be caused by an inventory shortage, financing difficulties also persist, and the lack of sales is weighing on the industry. Analysts refuse to assume prices will increase steadily as a result of this shortage because they still expect a backlog of foreclosures to flood the market.

“I don’t know if housing is set up to lead the economy back because of the fallout from past excesses,” said Daniel McCue, research manager at the Harvard Joint Center for Housing Studies. [Bloomberg]