America's housing recovery was a recurring touch-point at the Allianz Global Investors semi-annual Investment Forum in Frankfurt in January. Several of our experts reported that a favorable outlook for real estate was supportive of overall economic growth in the US. Indeed, a 17% surge in residential investment during the final quarter of 2012 partially offset deep cuts in government spending, leaving overall Gross Domestic Product (GDP) in positive territory. We believe the housing recovery is real, is gathering momentum and will continue to buoy growth in the near to medium term.
The tide has turned. After years of crushing weakness, housing is again at the forefront of the US economy. Compared to December 2007 – the month America entered the Great Recession – existing home sales have increased 12%. That outpaces concurrent upturns in consumer spending, manufacturing, inflation, nonfarm payrolls and overall GDP. And, unlike prior "homebuyer tax credit" flameouts, we think the current recovery is sustainable. This view is built on three supporting pillars:
The 3 Pillars of the US Housing Recovery