Home sales rise

The Democratic convention is just shifting into gear. But the most politically significant news of the day may have broken hours ago in Washington. On July 26, the National Association of Realtors reported that the sales of existing homes rose yet again. CBS MarketWatch said the 2.1% gain for the month of June surprised economists, who expected sales to decrease amid rising interest rates. As MarketWatch noted, the strength of the report was bolstered by the fact that “sales of existing homes were revised higher in May to 6.81 million units, indicating a 2.7 percent gain. May's sales pace initially had been estimated at a record 6.80 million units.”

War and terror notwithstanding, the 2004 election will likely still be shaped by the performance of the economy. And right now, no single economic indicator—not the latest jobs report or even, gasp, the price of gasoline—matters more than housing. After years of incredible gains, the housing market is linked more closely than ever to many Americans’ fiscal health, their sense of well-being, their views about the future and themselves. With the stock market on the skids and the job market’s recovery still uneven, the housing market is a crucial source of optimism for a nation disinclined toward pessimism.

On the surface, the latest news bodes well for President Bush. But it’s far from certain that he’ll be able to realize much political benefit. He must overcome several obstacles. First, the housing market must remain strong through the election. It’s impossible to say for sure, but I’m willing to bet that it will. The gain in housing prices will probably level off, but fears of a disaster are most likely overblown. During the late ‘90s, investors were free to bid shares of the latest IPO as high as they chose. Even in the most over-heated housing markets in the country, mortgage lenders and appraisers still applied something like a reality check on prices. So the bubble in housing, if there is one, is much smaller than the bubble in stocks.

Even if the housing market holds up, however, it’s not clear that the White House will get the political credit. Warnings of a housing bust have been a staple of the media and the financial world for several years, and by now many people believe a downturn is inevitable. By that logic, today’s surprising, almost unseemly increase could make the day of reckoning that much more wrenching.

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