Deutsche Bank chief economist sees reason to be optimistic about the housing market

Click to enlarge (credit: Deutsche Bank)
Click to enlarge (credit: Deutsche Bank)

The housing market is marching toward recovery and with it the rest of the economy, a note released today by Joseph LaVorgna, Deutsche Bank’s chief U.S. economist, said. Business Insider reported on the note, which said that the “residential housing market is in the very early stages of a durable recovery” and that since it was housing that pulled the U.S. into a recession, it will be housing’s recovery that pulls it out.

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In LaVorgna’s note, titled “The Housing Recovery Is For Real,” he argues that the evidence for recovery is in the year-over-year growth rate in residential investment. — compared to growth over the same period in non-residential aggregated demand, which he defines as GDP minus inventories and residential investment. LaVorgna’s calculation show that there is a four-quarter lead in residential investment. LaVorgna also cites strong residential construction, as a sign of improvement.

“This provides us with some comfort that the recent sub-par performance in the economy is not long lasting and that over time, domestic demand will strengthen, perhaps as concern over Europe fades
a bit and the ‘fiscal cliff’ is adequately dealt with,” LaVorgna said in the note. [Business Insider]Christopher Cameron

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