Winter Proves Challenging For U.S. Economy| HomeUnion

Winter Proves Challenging for the U.S. Economy for Third Consecutive Year

The U.S. economy shifted into a lower gear during the first quarter as GDP (Gross Domestic Product) growth slowed to the lowest rate in two years. Volatility in the global markets encouraged companies to pull back on spending during the winter months, pulling down GDP’s advance to a paltry 0.5 percent. During the first quarter of 2014 and 2015, the nation’s broadest measure ofeconomic strength also posted dismal figures before rebounding in the second quarter. Strong job growth and rising wages, along with easing headwinds from turmoil in overseas markets should result in domestic economic growth in the low-2 percent range in 2016.

winter homesOne of the bright spots in the BEA’s (U.S. Bureau of Economic Analysis) initial estimate for GDP was in the residential housing sector, where spending in the first quarter soared by nearly 15 percent. Both single-family and multifamily development supported the rise in fixed residential investment, though neither component is likely to move the needle significantly on homeownership rates. New home prices are disproportionately above existing home prices, and apartment development has been disciplined in most places.

Some signs of a price ceiling are beginning to emerge in the housing sector such as absent stronger wage growth. In March, the median price of an owner-occupied, single-family home fell 1.1 percent from the same period last year. Last month’s decline marked the third year-over-year decrease in the past four months. If the Fed signals a rate hike in June, some of the momentum in summer sales could be tempered as mortgage companies preemptively lift rates.


National Home Price

The investment housing market, meanwhile, continued to perform well during March. The year-over-year median sales price for investment homes climbed 8.5 percent to $192,600. The increase can be attributed to traditional asset appreciation and more investors moving into higher-end properties to find stable yields. Although the bull stock market has shown signs of life, weary investors who have been dogged by volatility over the past nine months are proactively repositioning their portfolios, including diversification into single-family rentals.

Ready to learn more? Schedule a call