"The great American housing market is back. The Case-Shiller housing index, using data from 20 cities through March 2013, showed the largest annual increase in prices in seven years. That’s one sign of the essential dynamism of the American economy. Despite dysfunction in Washington, despite the sequester, the American economy has once again shown its core character: flexibility and resilience.
A housing revival was inevitable at some point. The U.S. is the only rich country in the world whose population is growing. We add 3 million people to our number every year, thanks largely to (legal) immigration. That means, over time, we will need new housing—unless children want to live with their parents forever.
The American consumer is also more confident, and not without reason. Americans have been paying off their debts at a steady clip since the financial crisis. The U.S. economy is susceptible to bubbles and manias, but it also has the flexibility to adjust. People and companies respond to crises. They change past practices, take the pain and prepare for the future. When you compare American companies since 2007 with, say, Japan’s great corporations after that country’s crisis and recession, it’s clear that U.S. corporations are more ruthless in restoring productivity (even at the cost of firing people) and nimbler, which means that they often come through a crisis stronger. And faster. In sectors from automobiles to airlines to energy, companies are posting strong sales and profits.
American banks have been under fire from many quarters. Critics feel they should have been punished or broken up or more tightly regulated. But if you compare them with their principal competitors in Europe, they are far better capitalized and more secure and have much stronger balance sheets. As home prices recover, that should create a virtuous cycle between credit and housing that will enhance both stability and growth."