Non-farm payrolls have been growing strong. Next week will be another evidential moment.


The Federal Reserve has a big one coming up, and it can play importantly into the psychology, and therefore, the reality, of housing's recovery. It is a be-careful-what-you-wish-for moment for home builders.

September was to be the month that the Fed finally signaled its unequivocal thumbs up for the U.S. economy's healing. This was to come in the form of a tipping point on Fed interest rate policy, with a one-quarter-of-one-percent lifting of short-term borrowing rates. This move would signal confidence that the United States economy no longer requires accommodative policy to continue finding a healthy balance between supplies and constraints of resources it must access to operate.

As we learned this past couple of weeks, the ultimate fate on whether rates go up or not is linked to worldwide dashboard of trends, events, expectations, and surprises.

For those who are invested and vested in home building and residential development, this inflection point carries with it a mixed bag of implications.

On the one hand, a vote of confidence that the economy's recovery has spread--evidenced by jobs growth--beyond a few pocketed, lumpy, choppy, and iffy industries and geographies, into a sustainable, highly-dispersed, and smoother trajectory is a big positive that implies young adults in droves will pack up their belongings and move out of either their mom's and pop's places or their roommate havens into more of their own abodes. This would produce consumption, corporate profits, more jobs creation, wealth building, and demand for homes, both for-sale and rental.

On the other hand, raising the cost of money is raising the cost of money. That makes borrowing expenses go up, for both companies and individuals. Right now, particularly amidst acute shortages of housing inventory of both rental and for-sale varieties, and the ways that higher interest rates could further suppress the willingness of would-be sellers to list their homes because it would mean giving up a historically low interest rate in exchange for a higher one on a new purchase.

What's more base prices on homes have been over-correcting on the high-side after over-correcting on the low-side during the downturn. If higher rates come in before equilibrium happens on pricing, then monthly payments could be high enough to squeeze out would-be buyers from the market.

Still, a higher Fed rate, by and large, we believe would be a boost for housing, and it should be what home builders wish for most right now. It would signal a healthier resumption of market dynamics and the restoration of a belief system in freer enterprise business dynamics.  This, in turn, would be an affirmation that housing and construction can move up to its more normalized role as an economic driver of household consumption to come.

Here's to a renewed conviction that markets heal themselves and become stronger.