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Giant Squid: "without The Boost From Housing, Real Gdp Growth Would Fall Below 1% This Year"

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http://www.zerohedge.com/news/2013-08-13/goldman-without-boost-housing-real-gdp-growth-would-fall-below-1-year

Wonder why the Fed and the banks are so desperate to reflate the second housing bubble, to the delight of flippers and taxpayer consequences (deja vu) be damned? Simple: as Goldman points out in a note released last night, "without the boost from housing, real GDP growth would fall below 1% this year." That's the revised GDP by the way, the one that now includes iTunes song sales and underfunded pension plans in the sumtotal. Which in reality means that ex housing, GDP would almost certainly be negative. So the bigger question is what happens to housing which has already seen a shock to the system following the surge in interest rates in the past month and which hobbled both homebuilders and mortgage applications? This is what Goldman sees there: "On house prices, we have started to see the first signs of deceleration and expect a slowdown from the 10%+ pace observed over the past year. Our bottom-up house price model projects 4-5% annual growth rate in the next two years." Alas, since prices moves from top and bottom inflection point never happen in a straight line as everyone rushes to buy, or sell as the case may be, resulting in a skewed and pronounced move, once the reality seeps in that the artificial housing 'recovery' is over, watch what happens when everyone rushes for the door. That goes for GDP as well.

More from Goldman on housing's contribution to GDP:

How much will housing contribute to GDP growth?

Housing contributes to GDP growth in three ways: (1) the direct effect through residential investment; (2) the consumption impact through housing wealth and active mortgage equity withdrawal (MEW); and (3) the multiplier effect through increases in housing-related employment and easing of bank lending standards in a stronger home price environment. Using the same framework outlined in prior research, we project the contribution of housing to real GDP growth through late 2014.

Property is too big to fail it would appear, if it does the entire global economy is at risk.

Still it's nice of them to explain to the stupid how housing contributes to GDP growth and not bigger bonuses for the kind bankers creating all this wealth.

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http://www.zerohedge.com/news/2013-08-13/goldman-without-boost-housing-real-gdp-growth-would-fall-below-1-year

Property is too big to fail it would appear, if it does the entire global economy is at risk.

Still it's nice of them to explain to the stupid how housing contributes to GDP growth and not bigger bonuses for the kind bankers creating all this wealth.

what with all this wealth creation...how come i feel so much worse off?

Do the deluded tories really believe they can win the next election ?

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Housing contributes to GDP growth in three ways:

(1) the direct effect through residential investment;

(2) the consumption impact through housing wealth and active mortgage equity withdrawal (MEW); and

(3) the multiplier effect through increases in housing-related employment and easing of bank lending standards in a stronger home price environment.

1) has been proven to be largely false in the UK. Little additional building occurs due to planning restrictions

2) has been proven to be largely false. Everyone needs/wants fridges and consumer goods, regardless of tenure.

3) They keep throwing money at anyone who will take it. All it has delivered is inflation, not productivity.

The only way is contributes in the UK is imputed rents. Which for some reason that defies logic, they count as growth rather than inflation (the opposite of growth)

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Housing contributes to GDP growth in three ways:

(1) the direct effect through residential investment;

(2) the consumption impact through housing wealth and active mortgage equity withdrawal (MEW); and

(3) the multiplier effect through increases in housing-related employment and easing of bank lending standards in a stronger home price environment.

1) has been proven to be largely false in the UK. Little additional building occurs due to planning restrictions

2) has been proven to be largely false. Everyone needs/wants fridges and consumer goods, regardless of tenure.

3) They keep throwing money at anyone who will take it. All it has delivered is inflation, not productivity.

The only way is contributes in the UK is imputed rents. Which for some reason that defies logic, they count as growth rather than inflation (the opposite of growth)

Yes. The idea house price rises somehow increase GDP is utter ********.

It's not just some kind of extreme conspiracy theory, it has been thoroughly debunked by economists themselves. Unfortunately, other economists choose to lie about it.

The only positive wealth effect of housing is from MEW, which is just consumption brought forward.

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The housing bubble unquestionably inflated UK GDP. Unfortunately, not in any way that was sustainable.

This is doubly regrettable, since not only are we left with the legacy of debt, but successive govts, the Treasury and BoE et al have since squandered a trillion pounds trying to restore growth to an imaginary trend.

Fail.

trend-real-gdp-500x473.jpg

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The housing bubble unquestionably inflated UK GDP. Unfortunately, not in any way that was sustainable.

This is doubly regrettable, since not only are we left with the legacy of debt, but successive govts, the Treasury and BoE et al have since squandered a trillion pounds trying to restore growth to an imaginary trend.

Fail.

trend-real-gdp-500x473.jpg

1. Consumption brought forward through increased debt.

2. GDP doesn't measure real production, so various kinds of wealth destruction can boost GDP. In that sense housing can boost this arbitrary number, as can war and various other catastrophes, but it can only destroy real wealth. (In my previous post, I should have made this distinction, but ****** it - it's not like I'm paid for this.)

Edited by (Blizzard)

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