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Why is housing so important

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Apr 17, 2007 2:25 pm

Hi,

I'm fairly new and have a question: Why are the markets so concerned with housing, particularly housing starts.

I guess I'm more curious as to whether or not this has always been a concern of the markets or if this concern is a product of the past 5 years housing market being a prop to this economy?

Apr 17, 2007 2:33 pm

[quote=707SE]

Hi,

I'm fairly new and have a question: Why are the markets so concerned with housing, particularly housing starts.

I guess I'm more curious as to whether or not this has always been a concern of the markets or if this concern is a product of the past 5 years housing market being a prop to this economy?

[/quote]

The answer to the last question is "kinda both", I think.

If you look on the First Trust Portfolios website(www.ftportfolios.com), I think their chief economist has made some commentary on this issue in the last few months.

It is important to the markets because it is a cylical business and indicative of the overall strength of the economy, or so the theory goes.  Too, economists have been concerned about consumer spending, and if folks are buying homes they will also be buying carpeting and furniture and applicances to put in those homes.

Hope that helps.
Apr 17, 2007 2:57 pm

Good point. Brian Wesbury is the Chief Economist at FT. I always read his newsletter. He had a great article rationalizing the interest rate arena and what he expects, including the possibility of the market being undervalued by 20%...

Thanks again for the explanation.

Apr 17, 2007 4:39 pm

[quote=707SE]

Hi,

I'm fairly new and have a question: Why are the markets so concerned with housing, particularly housing starts.

I guess I'm more curious as to whether or not this has always been a concern of the markets or if this concern is a product of the past 5 years housing market being a prop to this economy?

[/quote]

1) It's something to talk about. If you ever have to put out a weekly market letter, it good grist for the mill.

2) It's an asset bubble in deflation mode, and people just love to talk about that. Especially if they missed selling at the top.

3) Alot of people believed residential real estate, (instead of A-shares/annuities) were the road to wealth. So we like to laugh at them. Just like there is no shortage of stocks, there is no shortage of housing.

4) An enourmous of amount of consumer spending (on cars, house crap, and houses) was enabled by loose lending standards. That faucet has been turned off.