Tags: Goldman | Hatzius | Housing | recovery

Goldman’s Hatzius: Housing on Verge of True Recovery

Friday, 06 January 2012 08:05 AM

Housing starts have already bottomed out and are poised for lasting improvement although overall housing prices will continue falling until the second half of this year, when they begin to bottom out, says Goldman Sachs Chief Economist Jan Hatzius.

"We're pretty confident that housing starts have bottomed at this point," Hatzius tells CNBC.

"It’s going to gradually pick up as the still large amount of vacancies and excess supply comes down."

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While the housing bubble from 2006 is largely a thing of the past, the country can expect "some small declines in house prices for most of this year basically because of the excess supply that’s still out there," Hatzius says.

"But we’re pretty confident that we're pretty close to the bottom here."

Housing threw the country into the Great Recession, and other experts agree its recovery will lead the country to more robust growth.

Housing starts and building permits shot up to a 1-1/2 year high in November, the latest data available, according to Reuters, fueling hopes that the sector is finally on the path to more pronounced recovery.

However, full recovery in the housing sector is still a long way away thanks to the glut of unsold homes, weak prices, high unemployment and tight credit.

"It will still take two to three years to work off the excess inventory and housing prices will remain under pressure through the first half of 2012," says Eric Green, chief U.S. economist at TD Securities in New York, according to Reuters.

"However, residential activity is now in an upswing (and) will contribute modestly to GDP growth in 2012," Green adds.

"While this will not drive the recovery, every little bit helps when growth is trending around 2 percent."

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