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Housing Is Suddenly a Bright Spot in the Economy

After a year of dragging down GDP, homebuilders are showing strength just when the economy may need it most.

Housing starts are picking up.

Housing starts are picking up.

Photographer: Luke Sharrett/Bloomberg

Ready for a little good news? As investors take stock of the fallout from the Silicon Valley Bank failure and wonder about broader fallout for the economy in the coming months, the housing market has delivered some reason for optimism. The yearlong drag from the housing market slump is winding down. And while we probably won’t see housing suddenly rocket higher like it did in the middle of 2020, a stabilizing market will help counter any weakness stemming from regional banks.

The housing effect began pretty quickly after 30-year mortgage rates first hit 5% last April. Single-family housing starts, which had been running at greater than a 1.1 million unit annualized pace since the fourth quarter of 2020, fell immediately as homebuilders pulled back and assessed the situation. By July the single-family housing start pace had slowed to 900,000 units, and by November just over 800,000.