New housing market data, released

GDP increase is good news for homeowners

Posted on 8/12/13 1:46:00 PM

The U.S. gross domestic product increased at an annualized rate of 1.7 percent in the second quarter of 2013, beating estimates and showing that the economy is still gaining steam. The growth comes on the heels of two lackluster quarters, with GDP up fractionally in the fourth quarter of 2012 and just 1.1 percent in the first quarter. It even beat estimates – economists pegged growth at 0.9 percent in a survey by Dow Jones Newswires.

Analysts suggest one of the main factors for the increase was the housing market's rebound. Prices have jumped to levels not seen since before the collapse, though without the overarching subprime crisis. Housing investment rose by 13.4 percent from April to June, according to the Commerce Department.
Home equity line of credit rates have remained low, though the Federal Reserve has hinted at tapering its qualitative easing program. If the Fed believes the economic recovery has been sufficient, mortgage rates may eventually increase, though there have been no official announcements as of yet.

Another segment responsible for the GDP increase was the export market, which jumped by 5.4 percent amid rumors of waning international growth.

Revisions
While the new numbers may tell an interesting story, the old data provides even better clues about the U.S. economy. Initial estimates showed a GDP increase at 2.2 percent in 2012, but revised numbers ticked higher to 2.8 percent.

The increase is part of a comprehensive measure taken by the Commerce Department to better track the overall economy. This quarter marks the first time the government provided data on research and development, and entertainment and the arts. Both sectors contributed to the GDP estimate.

Consumer demand
While the GDP numbers beat estimates, some segments of the economy remain somewhat fickle. Consumer spending, which makes up more than two-thirds of overall economic demand, rose by just 1.8 percent from April to June versus a 2.3 percent increase in the first quarter. Nonessential spending was lackluster, though the continued improvement of the capital and housing markets could urge consumers to buy rather than build their basic savings.

Another weaker area was public-sector spending, which dropped by 0.4 percent. Compare that to a 6.5 percent decline from October to December last year, however, and it suggests the potential for an increase once the third quarter numbers are in.