News in the run-up to the Thanksgiving holiday was dominated by on-going worries about the euro, Italy, Greece and then in the last three days about the Super Committee’s failure to offer a deficit solution. While none of these are likely to be resolved next week, we will have more news and possibly a clearer picture about housing along with some hints about the economy. Tuesday, November 29th will see the next S&P/Case-Shiller Home Price Index release; one day before we will get new home sales data from the US Census Bureau.
Recent housing news is not all bad. October permits for new construction were up sharply. Housing starts faltered due to weakness in apartment building construction while single family homes saw some strength. The market index published by the National Association of Home Builders (NAHB) was also up for October, reaching 20 from 18. Consumer sentiment, as reported by the University of Michigan Survey Research Center was also up solidly in November from October. However, consumers’ attitudes probably will dip given the Super Committee non-report, continued worries about European debts and banks and the sharp stock market drop resulting from these worries. One other positive hint is the weekly report of initial unemployment claims which has been under 400,000 for three weeks in a row. The 400,000 mark is the traditional dividing line between recession and stability; the last time we had a favorable run was for four weeks from March 11th to April 1st, last Spring.
Considering all the recent data and the winter season when housing and home building are usually dormant, housing is a neutral factor for the economy — not adding growth, but also not draining strength. Problem is we need something to add strength and housing, one of the traditionally strong cyclical factors, hasn’t done much for the economy in five years.