Business_news The stars are aligning for a V-shaped rebound in US housing — and ING says it could kickstart a swift recovery in other parts of the economy

Business_news

  • There are early signs that a V-shaped recovery may be underway in the housing market
  • A slew of data this week either showed early signs of recovery, or represented the low from the shock of the coronavirus pandemic. 
  • This could help lift other areas of the economy, especially those linked to housing, according to James Knightley of ING. 
  • “As people move to a new home they typically also spend money on new furniture and home furnishings, garden equipment and building supplies such as a new paint job and a bit of home improvement,” said Knightley. 
  • Visit business Insider’s homepage for more stories.

Like most parts of the economy, the housing market was slammed by the coronavirus pandemic and sweeping shutdowns to curb the spread of disease that kept consumers on the sidelines. 

But now, as states across the US reopen, there are signs of a rebound in housing demand that are encouraging and could lead a recovery in other parts of the economy, according to economists at ING. 

This week,new home sales jumped 17%, more than economists expected, as buyers rushed back to the market. Mortgage applications to purchase a home dipped slightly this week, but are a staggering 18% higher on the year andlast week hit an 11-year high.

And, even thoughexisting home sales stumbled in May, falling 9.7%, the National Association of Realtors expects it was the low point before what’s expected to be a solid rebound.

“At face value this is remarkable given the scale of joblessness in the economy and the ongoing uncertainty relating to the path of Covid-19,” wrote James Knightley, ING’s chief international economist, in a Wednesday note. 

All things considered, “the outlook for housing transactions, construction activity and employment in the sector is looking much better than what looked possible just a couple of months ago,” he said. 

Read more:A market-crash expert known as ‘Dr. Doom’ warns a 10-year depression is coming — and says investors are far too confident about a possible recovery

These early signs of a solid “V-shaped” recovery in the home market could have positive implications for other parts of the economy — especially those that are connected to housing, such as retail sales. “As people move to a new home they typically also spend money on new furniture and home furnishings, garden equipment and building supplies such as a new paint job and a bit of home improvement,” said Knightley. 

Going forward, a number of factors are likely to provide a “decent platform” for a recovery in housing and associated sectors.Mortgage rates remain at historic lows, and the Federal Reserve has signaled that monetary policy will remain accommodative for some time. 

In addition, the economy is adding jobs, which will further help fuel spending on big-ticket items such as homes, Knightley said. 

Read more:From a late-night infomercial to a 1,040-unit empire worth $188 million, how Jacob Blackett perfected his real-estate-investing strategy after losing $70,000 on his first deals

Still, there are potential risks of a setback, Knightley cautioned. Unemployment remains high, withmillions of Americanscollecting benefits and filing on a weekly basis. And, while the extra $600 in weekly unemployment benefitshave helped support consumer spending, they are set to end in July and it’s unclear that further stimulus will be approved. 

That could mean that households that’ve experienced job losses could soon feel significant financial pain. “Should this result in rising mortgage delinquencies and defaults this could derail the recovery phase with forced sales boosting supply and depressing prices,” said Knightley. 

Read more:The chief strategist of $2.5 trillion State Street recommends 7 ETFs for investors looking to profit from a permanently altered post-coronavirus landscape


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