The Latest Housing Data Is Bad News for People Predicting Recession
While some think a recession could be looming for the U.S., fresh housing data says the opposite.
Purchases of new U.S. single-family homes just hit their highest level in more than eight years, representing what Wall Street is calling a strong market.
"Today's report confirms the considerable strength in the housing market over the past few months," Rob Martin, an economist at Barclays Plc, said in a note. "We expect housing to continue to firm, on average, over the medium term, with a buoyant household sector supporting both prices and volumes."
George Pearkes, a strategist at Bespoke Investment Group, also pointed out an encouraging trend for the housing market. He said the data is the exact opposite of what would be expected leading up to an economic downturn. Note in the chart that before every recession for the last several decades, new home sales were either flat or in decline. This time they're heading in the exact opposite direction.
According to analysts at Societe Generale SA, the reasons for home sales' continued strength include an improving labor market, moderate wage gains, and near-record low mortgage rates.
Others note that the data also bode well for other parts of the economy. "When home sales rise, household spending on durable goods tends to pick up shortly thereafter," Neil Dutta, head of economics at Renaissance Macro Research wrote in a research note on Tuesday. "Average sales prices are up 8.8 percent over the last year. Coupled with the growth in sales, this is a positive development for U.S. homebuilders."
The SPDR S&P Homebuilders ETF is trading higher by 0.5 percent today, while the broader S&P 500 is lower by 0.23 percent.
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