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It Is All Good

October 19, 2012 – 5:11 pm

We had very good news on housing construction this week and this morning, though housing sales were a little weak, prices were higher and inventory fell below 6 months for the first time since 2006. It is clear that the housing market is improving and is going to finally add to our yearly GDP number instead of subtracting.

However, according to a recent article in the Financial Times, the improved housing market is not going to add much to our economy regardless of the strong turn up in recent reports. Their reasoning goes to the pricing of homes. The values fell so far that from a very low base a 10% or 20% increase is just not enough to make a significant impact on our large economy.

That may be true but it will make a significant impact in two areas: the construction workers who are finding jobs and the stock market. For jobs any addition is welcome. For the stock market, as it rises because of a better housing market and with nearly 50% of the families in the U.S. owning stocks either through a 401K type plan or in IRAs, increase in wealth of any kind is a welcome relief.

Of course an improving housing market means higher home prices, another reason for the consumer to cheer as home ownership is very high in the U.S. and it too is a store of wealth.

We should welcome any improvement in housing! When the trend is up everyone benefits.

Good Trading
Steve Peasley

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