Beacon Economics is expecting the U.S. economy to grow by 3% through 2013 with continued gains in employment – the nation has been adding over 200,000 jobs monthly for the past few months – and an unemployment rate that will drop to 7% by the end of the year.

Optimism for the rest of 2013 is being partly driven by a resurgent housing market. Home prices have been climbing at a significant pace and will continue to rise through this year and 2014, at a minimum. The reason for the jump in prices is simple—tight inventories and incredible affordability.

Beacon Economics does not believe the nation is entering another housing bubble. Rather than being overpriced, homes still appear to be underpriced from a long-run perspective. Home prices could rise by upwards of 35% or more from current levels before they would look misaligned with fundamentals.

Nominal aggregate personal income had been growing at an annualized rate of slightly over 2% for most of 2012, yet over the past four months the pace has more than doubled to almost 6%.

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