Recession or no recession? That's a key question for real estate because any sort of deep or prolonged recession would choke off all hopes of a housing recovery anytime soon.

But last week's big economic number -- positive growth in the national gross domestic product for the second straight quarter -- is the latest sign that this economy still has some fight left in it.

Economists define a recession as two straight quarters of negative GDP... so we're definitely not seeing that. No question though: The GDP growth rate is anemic -- just under one percent for the first quarter. But remember that doomsayers last Fall had projected us to be well into a recession by now.

Instead, the economy keeps defying the worst predictions: Exports are booming, job growth remains positive, unemployment is at 5 percent. And the National Association of Business Economists is forecasting a much healthier 2.2 percent growth rate by the third quarter.

Even new home sales have bounced back for the first time in half a year -- up by 3.3 percent last month, according to the Commerce Department.

Mortgage Bankers Association economist Orawin Velz points out that the economic stimulus package is just now beginning to flow through to consumers ... and the stimulus checks "should help lift (consumer) spending growth in the coming months." That's good.

Mortgage interest rates continue to be highly favorable for home shoppers. The Mortgage Bankers' latest weekly survey found 30-year fixed rates remain just below six percent on average, and fifteen year rates are around five and a half percent.

Home sales are still far below year-earlier levels in many local markets, but economists agree that the recent changes by Fannie Mae and Freddie Mac to ease downpayments and other underwriting restrictions have the potential to stimulate sales in the next several months.

Already, there are scattered reports of unexpected sales increases in some markets that had been almost moribund for months. Sales in the Sarasota-Bradenton area on the west coast of Florida, for example, were up five percent last month, and the median sales price increased.

Dr. Lawrence Yun, chief economist for the National Association of Realtors, pointed to San Diego, California and Fort Myers, Florida as two local markets that had been in the sales doldrums, but now with lower prices, are racking up sales gains.

"Lower pricing and low interest rates," said Dr. Yun in a recent commentary, "are starting to generate results."

That's the equation that could move us past the down cycle … very possibly starting sometime in the second half of this year.

Published: June 5, 2008

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Kenneth R. Harney writes an award-winning, nationally-syndicated column on housing and real estate from Washington, D.C. He is also managing director of the National Real Estate Development Center, a professional education company. He is a past member of the Federal Reserve Board's Consumer Advisory Council, a committee that by federal statute reviews all Fed actions on home mortgage, consmer credit and banking industry regulation. He served as a member of the U.S. Department of Housing and Urban Development's Working Group on Computerized Loan Origination (CLO) systems, and is a member of the Editorial Board of the Fannie Mae Foundation's journal, Housing Policy Debate. He is the author of two books on mortgage finance and real estate.