Weighing The Week Ahead: Is The Housing Rebound For Real?
Jeff Miller | Feb 17, 2013 02:52AM ET
The question has special significance because the consensus economic forecast assumes improvement in this sector. This week's economic data include the most important reports on the housing market. The FOMC minutes will also provide insight into Fed policy on the purchase of mortgage securities. With Congress on an extended President's Day recess, I expect housing to be the theme of the week.
The Background Evidence
On the positive side there is the evidence of the market. The iShares Dow Jones Homebuilder Index shows the dramatic rally since June, 2012 – about 85%. The gains have been supported by commentary from executives at the major industry leaders and the top real estate publications. For many, it creates a sense of déjà vu.
Some pundits have called this quite accurately, including Schwab's Liz Ann Sonders. In housing spills over into the general economy.Investment Conclusion
The housing stocks are too rich for me, although we have sometimes held ETF positions in the Felix portfolio. My current focus is on the implication for the overall economy. The story continues to be both important and positive. Housing has been a multi-year subtraction from the economy. Even a modest rate of growth represents a major change with implications for consumers and employment. This helps to explain the spending and sentiment strength, even in the face of the payroll tax change.
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