Are You Confident in this Housing Market?

Since 2009, real estate hasn’t mattered.

Housing was bust. Board ’em up and call in the squatters. The evening news teams were there, shoving cameras in the faces of sobbing families in front of the endless rows of foreclosure signs.

We watched these stories unfold for the past five years. We saw how the housing bubble fueled the market’s rise from 2003-2007. As home prices rapidly appreciated, stocks followed suit. Housing’s top was then the bellwether for the 2008 collapse.

That’s when stocks and housing took separate paths.

Stocks vs. Case Shiller

Since 2009, equities had to blaze their own trail toward higher prices.

But that’s all changing now…

In just few short minutes, S&P/Case-Shiller releases updated home price data. The consumer confidence number will immediately follow. Two headliners in a week packed full of important data…

It’s fitting that confidence and home prices will share this morning’s financial headlines. Any way you look at it, price is all about confidence — in this case, the confidence that your house will retain its value and not bankrupt you. As this confidence grows, it will continue to spread to equities.

It’s impossible to deny the transformation in the housing market over the past 12 months. Rising prices, tight supply, building permits, housing starts — all pointing toward recovery.

And as much as we’ve tried to separate homes and stocks since the bottom four years ago, this stock market needs a healthy housing market. Investors need it, too. They need their net worth to remain safe, giving them the confidence to take on risk again.

It’s happening right in front of us. The numbers will continue to improve. A newly-stable housing market will help fuel stocks this year as they approach important milestones. It’s only a matter of time…

Greg Guenthner
for The Daily Reckoning