EC Weighing The Week Ahead: Springtime For Housing?

This week’s economic calendar includes some key data on the housing market and few other major reports. The debate about the strength of the U.S. economy continues. The housing market is an important contributor to the economy. As we enter the key season for real estate many will be asking:

Is it Springtime for housing?

Prior Theme Recap

In my last WTWA, I predicted that there would be special attention to the mixed message of economic reports, contrasting the relative strength of employment with other data. That was a major theme. Some insisted that the employment was overstated. Others said it was a lagging indicator. A few mentioned that GDP was probably understated. Friday’s relatively strong data continued the mixed message. I also suggested that the political sideshow would grab attention, but that was obvious.

Once again the early strength faded at the end of the week. Doug Short captures the story of the decline, the third straight) with his excellent weekly chart. (With the ever-increasing effects from foreign markets, you should also add Doug’s World Markets Weekend Update to your reading list).

The weekly chart adds more analysis on the major themes as well as a multi-year context.

We would all like to know the direction of the market in advance. Good luck with that! Second best is planning what to look for and how to react. That is the purpose of considering possible themes for the week ahead. You can make your own predictions in the comments.

This Week’s Theme

The economic calendar has mostly secondary reports again this week. Friday’s stronger economic data only intensified the debate, as the market reacted negatively. This week features three important housing reports and two of lesser significance. Since springtime brings higher expectations for this sector, I expect more attention than usual. The punditry will be asking:

Is it Springtime for Housing?

Background

Attention focuses on housing with some frequency since it is important to the economy. Wells Fargo notes that residential investment rose 14.8% in the past year, contributing 0.5% to the Q1 GDP growth (which coincidentally was 0.5%). Last year the National Association of Homebuilders calculated that housing was over 15% of GDP. The impact is not just home sales, but also remodeling.

Viewpoints

The basic themes, moving from bearish to bullish on stocks are as follows:

It is easy to find disciples for each viewpoint.

As always, I have my own opinion in the conclusion. Make your own choice, and feel free to make your case in the comments.

But first, let us do our regular update of the last week’s news and data. Readers, especially those new to this series, will benefit from reading the background information.

Last Week’s Data

Each week I break down events into good and bad. Often there is an “ugly” and on rare occasion something really good. My working definition of “good” has two components:

The Good

There was some good news.

Let’s keep this simple.

The Atlantic has an article that is geared toward non-economists, but explains the key points. The article notes that quits are highest in low-paying jobs and lowest among financial services workers and government employees.

Doug Short illustrates the strength of the voluntary quit rate versus layoffs.

The Bad

Some of the news was negative.