NAHB Index: Canary in a Coal Mine--or Not?

Does housing drive the economy? Well, to a small extent, yes. Does it help drive the stock market? Good question. Some market pundits have been opining that if home values decline, foreclosures soar and homeowners in general feel pinched and stop consuming, that the economy will tank and take the stock market down with it. Buttressing their argument is the seeming correlation between the National Association of Home Builders’ NAHB Home Builder Index—a proprietary measure of the level of homebuilding activity—and the stock market, as represented by the Standard & Poor’s 500-stock index. (Routine disclosure: Standard & Poor’s is, like BusinessWeek, owned by The McGraw-Hill Cos.) The correlation, of course, isn’t real time, since it takes time for the housing problems to feed through the economy and, in turn, the stock market.

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