The Week Ahead: For an economic trend, nothing beats home sweet home

May 17, 2014 

Slower is steadier. Slower is sustainable. Slower growing home values is better in the long run, even if that means a more shallow economic incline.

Home values are a significant driver of consumer spending and accumulated wealth. Sure, the Dow Jones Industrial Average hitting new highs helps create new riches, but only about half of Americans own stock. Most people who do own stock hold only a few thousand dollars' worth. While that may amount to a significant investment for many households, it pales in comparison to the financial bet Americans have riding on the housing market. Almost two-thirds of Americans own their homes, or, more accurate, own a portion of

their homes.

This is why home values may be a better driver of underlying economic confidence. Buying a home takes a job with a steady income, thrift, faith in one's fortunes and trust in our communities.

Next week, the April reports on existing home sales and new home sales will provide a snapshot of the spring selling season. The pace of sales and median sale price growth has been slowing since July but they continue recovering from the collapse just a few years ago. Data from any single month can be fickle, but a steadily improving housing market is preferable over one swelling with unchecked expectations. If April's data shows a drop in the rate of sales from a month earlier (or even a year earlier), Cassadra-like predictions over another housing bust will follow. Similarly, an abrupt jump in the appetite for American homes will no doubt bring talk of a bubble.

While homeowners may long for a quick return to the values of 2006, a steady climb will better support the finances of millions of owners, their lenders and the broader economy.

Tom Hudson, financial journalist, hosts "The Sunshine Economy" on WLRN-FM in Miami, where he is the vice president of news. He is the former co-anchor and managing editor of "Nightly Business Report" on public television. Follow him on Twitter HudsonsView.

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