No One Told Housing Stocks a Recession Is Coming

If the U.S. economy is headed toward a recession and an end to the current bull market in the near future, it will be doing so, uncharacteristically, without the help of the housing market.

Equity investors have been spooked by a series of bearish reports on the U.S. economy in October, including surveys from the Institute for Supply Management that show the American manufacturing sector contracting and the services sector slowing significantly helping send down the Dow Jones Industrial Average 2.9%, the S&P 500 index 2.4% and the Nasdaq 1.8% month-to-date.

But data on the housing market has been trending in the opposite direction, with new home construction rising to the fastest pace since 2007 in August, and pending home sales trending up as interest rates fall, improving affordability.

“Unlike some of the previous manufacturing slowdowns we’ve seen during recessions, U.S. housing is doing quite well,” wrote Keith Lerner, chief market strategist at SunTrust Advisory Services, in a Wednesday note to clients. “In fact, the NAHB Home Builders Index has climbed to the highest level of the year. Similarly, housing starts recently rose to a cycle high. This is important as this indicator has peaked almost two years ahead of recessions, on average.”

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