`3 reasons housing recovery may be shortlived
May 7, 2013
Housing prices have surged 8 percent in the last year and some homebuyes are in a rush to place their downpayment on a new porperty.
However, some financial investors fret the growth in the housing market will be given short shrift.
Here are three reasons the housing recovery may not last:
The housing recovery is being led by investors. One problem is that investors are leading the latest surge in home prices, said Dean Baker, co-director of the Center for Economic and Policy Research. They are taking advantage of low interest rates and depressed home prices and when those rates and prices rise, they'll likely pull back, he said.
"An investor-driven boom is likely to end badly," said Baker. "I'm worried that some of the big jumps in prices are driven by the same sort of speculation that drove the [original] housing bubble."
The economic recovery is just not strong enough yet.
"These days, I worry more about the economy hurting housing than housing hurting the economy," said Jared Bernstein, a senior fellow at the Center on Budget and Policy Priorities, a Washington D.C.-based think tank.
He's especially concerned about employment. Hiring slowed significantly in March, with just 88,000 jobs added — the weakest showing since last June.
The sequester. Headwinds from the current round of government spending cuts — $85 billion worth — could also curb the housing market's recovery.
"The spending cuts from the sequestration [will] hit their apex this summer," said Mark Zandi, the chief economist for Moody's Analytics.
— Courtesy of CNN Money
Recommended Stories For You
Trending In: Business
- Meet your merchant: Innovation in business — Grande Wood Designs to share retail space with Beam “Easy Living” Center
- Doug Behl and Ken Getz: Repurpose an existing laptop hard drive
- Utterly delicious: Nevada City’s Wheyward Girl Creamery teaches customers how to turn milk into cheese
- Are commercial condominiums good investments?
- What’s the scoop?: Nevada City’s Treats ice cream shop is on the move
- Repeat offender back in Nevada County Jail, police say
- Ideas swirl about affordable housing in Nevada City
- Crime Roundup: Penn Valley murder; walking stick assault; ATV chase
- Now hiring: Grass Valley, Nevada City undergoing changes
- Nevada County authorities say Auburn man found with suspected heroin, meth