Housing Double Dip?

Following the housing data this morning, the bears are out and on the prowl trying to tell the world why the data was lousy. The number one selling point; single family home production was lower year over year while multifamily starts was the key driver of the gains this am. Also, the NAHB report from yesterday came in flat month over month from its very low level if 13 - this argues that the homebuilders do not see any recovery in sight. In terms of a search for the word "housing" in under Google's blogs news section, most of the stories, outside of the major news services was this; housing starts stronger than expected BUT... Bottomline is simple; nobody believes housing is going to improve and those who do argue that strength could arrive sooner than later are told to go "sit in the corner because you are wrong."

However, as the chart here shows, perhaps the housing bulls are starting to score points. The HGX which some label as a faulty measure for housing, is stabilizing around the 20 month MA. AS you can see from this chart, when it rolled over in 2006, the housing market following suit broadly and thus the correlation is there between this index and the broad housing market. If you look at the top chart, one that measures relative outperformance by the housing indexes versus the S&P 500, shows the major housing indexes just bouncing along the bottom so from a demand perspective, this does not argue that demand is rising; conversely, this does not argue for a double dip in the housing market either.

So taken together, we have stability with a slight hint that things are about to improve. I am sure now the bears will come out and tell me to "sit in the corner."

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