Boston Housing To Drive Economic Growth

The Boston housing recovery is expected to be the primary driver of the Greater Boston area economy this year.

Boston housing expected to drive economic growth in 2013.Homebuilding activity will likely remain the strongest growing component of the economy in 2013, followed by consumer spending, increased domestic energy production, and stimulus from the Federal Reserve.

Home sales rebounded to the strongest level in five years in 2012, as home building bounced back to levels not seen since early in the recession. Near record low mortgage rates, rising home prices and a drop in foreclosures have combined to bring buyers back to the Boston housing market.

Lot of Demand for Boston Housing

There’s a lot of pent-up demand for Boston housing, and very little supply. As demand continues to improve, home builders have nothing to sell. They’ll have to build. Growth in building will mean adding not just construction jobs, but also manufacturing jobs building the appliances and furniture needed in the new homes, which in turn drives overall consumption higher.

Economists say the tight supply and renewed demand for Boston housing should lead to higher home values — about a 3.7% increase is anticipated.

But even with the bullish outlook on Boston housing, economists are still forecasting only a modest rise in the overall economy this year. The consensus estimate is for economic growth of about 2.4% in 2013, only a modest improvement from the 2012 growth rate of about 2% they’re forecasting when the final numbers are in.

The biggest concern economists have is a standoff on Capitol Hill. About three-quarters of those surveyed recently picked Congressional gridlock — which could result in a cutback in federal spending — as the biggest problem facing the U.S. economy.

What do you think? Do you think Boston housing is going to be the leading driver of the Greater Boston area economy this year? Or will another driver take control? We’d love to hear your opinion. Just leave your comment below.

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