This Day On The Street
Continue to site
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

New Home Data Still Confound but Really Don't Matter Now

NEW YORK (TheStreet) -- Let's be honest: If data from the housing market isn't confusing you right now, you're not paying close attention.

Fortunately, it matters less than you might think -- and will help stock investors more than they might realize.

Monday's modestly-disappointing report on new home sales for July is just the latest example. The Commerce Departmennt said single-family home sold at a seasonally adjusted annual clip of 412,000, down 2.4% from last month's estimate -- which the agency revised upward today. The data also missed the consensus forecast by about 18,000 units a year -- very broadly, 1,500 homes a month.

Read More: 10 Stocks George Soros Is Buying

On the surface, it's another mixed indicator in an economy still trying to find its full stride. But there are a few reasons why  it matters less than you may think.

The economy is generating enough jobs without housing.

Most people's top economic indicator is jobs -- and even without construction in top form, job growth is more consistent than it has been in 20 years. The economy has generated 200,000 or more jobs every month since January thanks to growth in construction employment.

This sets things up for broader economic confidence to make housing pick up soon enough. It would have been nice if housing had led this year's economy, as a lot of pundits (this one included) once expected, but increasingly it's not necessary. A market selling 50% more new homes would create about another million jobs or so -- different economists assume three to five jobs per housing start, depending on whether they count jobs at home-improvement stores and other spillover effects. That would help a lot, but momentum in manufacturing and services means it's not necessary that it happen rapidly.

Soft housing markets mean low interest rates.

Critics may argue that the Federal Reserve is fighting the last war and ignoring inflation dangers, but speeches from Janet Yellen and other officials make clear that supporting the housing market is still a major goal. 

Read More: How WhatsApp Will Help Make Facebook Money

So is promoting wage growth. Economists have pointed out that construction is a big source of middle-wage jobs that can buoy the earnings of moderately-skilled workers whose incomes plunged after 2007. Promoting those goals means keeping rates lower, longer. Oddly, we are in a place where a weaker housing sector in a modestly-accelerated economy.

1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Submit an article to us!
SYM TRADE IT LAST %CHG
AAPL $128.70 -0.19%
FB $78.81 -0.23%
GOOG $540.78 0.54%
TSLA $230.51 1.98%
YHOO $42.04 -1.11%

Markets

DOW 18,070.40 +46.34 0.26%
S&P 500 2,114.49 +6.20 0.29%
NASDAQ 5,016.9290 +11.5380 0.23%

Partners Compare Online Brokers

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs