The Week Ahead: Stock market steals headlines, but housing is key

June 22, 2013 

Any confidence among consumers probably can be attributed to the rebound in two markets: the stock market and the housing market. Since barely half of American households have any money invested in the stock market but two-thirds own their homes, the direction of the housing market likely has a bigger impact on our collective and individual economic convictions.

Already we have seen existing home sales jump. May sales increased at the fastest pace since 2009. Median prices have picked up considerably, but the proportion of first-time home buyers continues shrinking. That is not a healthy trend, as those new buyers are a key component in the "trade-up" market.

It is no secret the single biggest contributor to the housing rebound has been the Federal Reserve. With a tepid job market and stagnant wages, record-low borrowing rates have helped buyers and pushed investors into the housing market. The rush to real estate has brought comparisons to market conditions in the past decade. While it's dangerous to describe a new market cycle as "different this time," today's home buying is not aided by liar loans and imaginary appraisals, as the last housing rush was.

Tuesday's new home

sales will continue to show a tight supply of new homes is and strong demand. That dynamic has helped fuel price increases. Evidence of that also comes Tuesday with the Standard & Poor's/Case-Shiller Home Price Index. Its measurement of prices in the 20 top cities may continue to show a double-digit pop this spring, compared to a year earlier.

Then there's the tear home builders have been on. Lennar is the third-largest builder in the nation. KB Home is the fifth. Both report their latest quarterly results in the new week. KB Home builds primarily on the West Coast, while Lennar concentrates along the East Coast.

Taken together, their order books, new home sales and pricing trends will give an indication of the resiliency of the housing recovery.

Tom Hudson, a financial journalist based in Miami, is the former co-anchor and managing editor of "Nightly Business Report" on public television. Follow him on Twitter @HudsonsView.

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