Washington The economy is improving, with home sales up, jobless claims down and inflation tame. Yet there are concerns the economic rebound won’t get much juice from the housing market, which is being fueled by government tax breaks.
Sales of previously occupied homes grew by nearly 7 percent last month, more than expected, the National Association of Realtors said Thursday. It was a welcome sign after three months of declines, and a solid kickoff to what’s expected to be a strong spring selling season.
Nevertheless, many analysts caution that the housing rebound could fade in the second half of the year. They predict a flood of low-priced foreclosures will hit the market and push down prices in a destabilizing “double dip.”
Another threat to the U.S. economic recovery is fallout from the Greek debt crisis. On Thursday, Europe’s statistics agency found that Greece’s budget deficit last year was larger than previously thought, which may push the country to seek emergency loans.
So far, “the recovery looks like it will continue,” said Jay Feldman, senior economist with Credit Suisse. The government also reported Thursday that new claims for unemployment benefits fell by 24,000 to a seasonally adjusted 456,000, the Labor Department said. And in a separate report, the government said wholesale prices rose 0.7 percent last month. But excluding volatile food and energy costs, prices rose only 0.1 percent, which means little risk of inflation.
The Obama administration says its policies have helped stop the housing freefall. The government is offering tax credits to homebuyers and paying incentives to lenders who rework loans for troubled borrowers.
But critics contend the administration’s policies will only postpone the pain. They say the government shouldn’t be providing a subsidy to buyers who would have acted anyway. And so far, the government’s foreclosure prevention effort hasn’t made a dent.