It's a classic "signal vs. noise" moment for those who eat, sleep, and breath home building this week. The week ahead features one leading housing indicator--pending home sales, this morning at 10 a.m. EDT--and two lagging economic indicators, the Case-Shiller Index and the Bureau of Labor Statistics Employment Situation report. Pending Home Sales, a data point that comes from the National Association of Realtors measuring contract activity for existing home sales--orders--will likely reflect continued scarcity of available for-sale supply in the markets, suppressing volume and raising price levels.
Case-Shiller, due tomorrow morning at 9 a.m., will be a mainstream media magnet for at least a day or two, since a greater and greater proportion of sales during the measurement period of the trailing three months will be "normalized," we'll see another headline-grabbing percentage increase in Case-Shiller's 10- and 20-market surveys. Many of these markets function outside the sphere of high-volume home builders' operational footprints, but Case-Shiller is nothing if not proof that Animal Spirits--i.e. consumer psychology, fear, greed, and value--run as powerful currents through housing's layers of buyer demand, builder operational capacity, and housing finance and policy.
Ben Casselman's piece here in the Wall Street Journal points up a couple of unappreciated insights as policymakers and idealogues have debated the meaning of the profound decline in labor force participation over the past several years. A jobs report is no longer simply a jobs report, for each data print is fraught with a complex layering of commentary and invective. On the one hand, we see a decline among the youngest range of workers as an omen that the economy has locked out an emerging generation of employees, and on the other, a decline among older workers we're saying is the economy spitting Baby Boomers into forced early retirement.
Casselman's analysis suggests otherwise, or rather proves it.
Focus on labor force participation rates is an important way to get a grip on as many as three million workers who've been lost to the workforce for long enough that they're an individual and collective worry. But, like many issues, events, and developments, anecdotes do not do justice to the actual, noise-reduced trend: employment is slowly picking back up.
Too, in the past couple of years, home builders have taken their lumps in weeks like this one, where emotion and psychology go off to the races thanks to lagging indicators.
The next four to six weeks are a home builder's best opportunity to tune into the "signal vs. the noise" of the moment.
The signal, deny it or not, is a home buyer market that at least temporarily allows new-home builders to be a solution to a living challenge, a life-building challenge, a community-formation and culture-enriching challenge. People like you and me feel we can get a good, smart, non-sucker deal from buying a new home.
That's the signal. Don't interrupt it, or distract too many folks, with noise. Read More