Housing Not Collapsing

One of the main points that the bears make about the current state of the economy is that housing, the key variable in the economic model, is collapsing and thus all the things that the government has done to prop up housing has been one waste of taxpayer money. Perhaps it has on the spending side but in terms of the "collapse" as every market commentator and bear will have you believe, it is not happening. The one variable I use for the housing market and has been a very good leading indicator of things to come, the Philly Housing Index (HGX), is simply range bound and not accelerating. If you think about it, why should it? there is a large amount of supply in the market and demand is mediocre. However, based on this chart, the housing market looks like it is getting ready to ramp - just look at the shape of the HGX relative to the channels!

So if housing getting ready to ramp, what does that do to those who believe the world is coming to an end? A couple of things. first, stocks on balance will be in rally mode and it will not just be housing. Second, the fed is very much on the table but not in terms of "QE2" but rather rate hikes. I believe the Fed's current policy on the rate side is easy by almost 2% while on the money side could be "easier" - they are actually tightening up at the moment it appears based on the growth rates of MZM and the base.

Going forward I will continue to watch this chart closely because if the HGX wakes up and bounces past the midpoint of the channel, chances are the housing market will be following suit soon - and perhaps pending home sales data, combined with the comments out of Toll Bros a few weeks ago are the first clues of much better times ahead.

Related articles by Zemanta

• Chart Of The Day: The Housing Bubble Has Not Fully Deflated (outsidethebeltway.com)
• The Answer To A Housing Recovery: Lower Prices (businessinsider.com)
• 15 Signs The U.S. Housing Market Is Headed For Complete And Total Collapse (businessinsider.com)
• Fear And The Housing Market (outsidethebeltway.com)
• Three Essential Reads on The Housing Market Right Now (blogs.forbes.com)