ANEMIC ECONOMIC GROWTH -WHAT EFFECT ON HOME PRICES

Q1 GDP Revised Up to 0.8% Annual Rate

by Bill McBride on 5/27/2016 08:33:00 AM

From the BEA: Gross Domestic Product: First Quarter 2016 (Second Estimate)

Real gross domestic product -- the value of the goods and services produced by the nation’s economy less the value of the goods and services used up in production, adjusted for price changes -- increased at an annual rate of 0.8 percent in the first quarter of 2016, according to the "second" estimate released by the Bureau of Economic Analysis. In the fourth quarter, real GDP increased 1.4 percent.

Eric Rosa comments - What effect does anemic  GDP growth have on national home prices? On first glance, one would think that slow growth means family income  growth would also be very slow. That makes sense. And... slow family income growth translates into  slow home price increases. That makes sense. But, maybe that slow income growth  results in more families staying in their homes, not "moving up" and not selling their homes. And just maybe, that lack of homes for sale, low inventory levels, results in prices going up at a pace much faster than GDP growth. I THINK THAT IS WHAT WE HAVE GOING ON RIGHT NOW.