Housing Will Shine in 2013 Despite Sluggish Economy

Economic growth will slow to 1% in the current quarter from 3% in the fourth quarter of last year, but that will not stop the recovery in housing, according to the Wells Fargo Securities Economics Group.

“While other sectors may lag somewhat due to economic uncertainty and politically fueled fiscal policy debates, housing will continue to produce positive material results in this fundamentally sluggish economy,” the WFS economists write in a new report.

They are forecasting that single-family starts will jump 27% in 2013 and multifamily starts will be up nearly 30% from 2012. That means housing starts will hit 990,000 in 2013, up from 775,000 last year.

“Residential construction remains the economy’s bright spot,” the economists say, which will help retailers, financial services firms, building product manufacturers and commercial development.

Despite recent speculation, the WFS economists doubt the Federal Reserve will end its agency MBS purchase program during the first half of 2013.

“We would be surprised if the program ends before next fall. The Fed would like to see a self-reinforcing recovery take hold in the housing market before they pull support out from under the mortgage market,” according to a separate WFS report.

The Wells Fargo Securities economists expect economic growth will increase from 1% in the first quarter to 2.9% in the fourth quarter of 2013, but gross domestic product will only increase by 1.7% for the full year, compared to 2.2% in 2012.

(NMN used two WFS reports for this story—a Jan. 8 Housing Data Wrap-Up report and a Jan. 9 Monthly Outlook report.)