VRA Update: Is the Housing Market Really Strong?

Oct 29, 2015

Literally every market analyst has been saying the same thing; the housing market is strong, and it's telling us that the economic recovery is in good shape. Certainly, the FED has been making this their case for higher rates....but is it actually the case?

Clearly, it WAS the case for most of 2015...as the chart below makes clear...UNTIL late August, more specifically until that big 8/24 sell off that took the Dow down 1100 points in a single day.

In what I believe could be a most important disconnect, the HGX (housing index) is down more than 8% in the last two months, while the stock market has rallied back sharply. Troubling sign for the US economy, and likely an advance indicator of where stocks are headed.

In fact, pending home starts were just released, and for the second straight month they missed expectations, and by a wide margin. Instead of a positive 1% number, we got -2.3%...the lowest level for the past 12 months.

As we've seen in the recent past, as goes housing, so goes the economy. Unless this chart can turn up, US economic growth will continue to lag expectations. In other words....no FED rate hike.

Instead of a FED rate hike, we will almost certainly begin to hear talk about additional economic stimulus, and even MORE QE. Hard to imagine for most, I know...but this is what a global economic crisis looks like...as it begins to unfold. Sadly, this is a preview of our economic future to come.

Let's keep a close eye on this chart of housing...looks very much like it is rolling over.

Kip