The week ahead

Tom Hudson: Home sales are the best sign of recovery


Special to The Miami Herald

Any confidence by consumers probably can be attributed to the rebound in two markets: the stock market and the housing market. Because barely half of American households have any money invested in the stock market but two-thirds own their homes, the direction of the housing market likely has a bigger impact on our collective and individual economic convictions.

Already we have seen existing home sales jump. May sales increased at the fastest pace since 2009. Median prices picked up considerably, but the proportion of first-time home buyers continued shrinking. That is not a healthy trend as those new buyers are a key component in the "trade-up" market.

It is no secret the single biggest contributor to the housing rebound has been the Federal Reserve. With a tepid job market and stagnant wages, record low borrowing rates have helped buyers and pushed investors into the housing market.Tuesday’s new home sales will continue to show just how tight supply of new homes is and how demand remains strong. That dynamic has helped fuel price increases. Evidence of that also comes Tuesday with the S&P Case Shiller Home Price Index. Its measurement of prices in the 20 top cities may continue to show a double-digit pop this spring compared to a year earlier.

Then there’s the tear home builders are on. Lennar is the third largest builder in the nation. KB Home is the fifth. Both report their latest quarterly results in the new week.

Taken together their order books, new home sales and pricing trends will give an indication of the resiliency of the housing recovery.

Tom Hudson is a financial journalist based in Miami. He is the former co-anchor and managing editor of Nightly Business Report on public television. Follow him on Twitter @HudsonsView.

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