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Real Estate Providing Positive Stimulus

July 1st, 2012 | real estate, puchase, refinance

Data on real estate sales and construction to be released shortly should be very interesting.

For the first time in a long time, real estate is not a drag on the economy. On the contrary, for the first time in years real estate is in a position to provide stimulus to the economy in the shadow of this current slow patch. Thus far this year the real estate market is growing approximately ten percent year-over-year. We need this continuous growth to lift the real estate market out of its long term slump and to start pulling its own weight within the economy.

When people purchase homes, they contract with moving companies, purchase furniture and undertake renovations. Millions of Americans are also refinancing and this should provide further stimulus as payments are lowered and this frees up money to increase consumer spending. However, a high percentage of these refinances are actually going toward shortening the terms of the loans. This trend is great for the long-term health of the economy as Americans pay down debt and increase the equity in their homes, yet it lowers economic stimulation in the short-term.

Source: David Hershman,The Hershman Group