Housing market boosts stock market

Posted on May 5, 2009
Filed Under Economy, Homes, News | Leave a Comment

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The S&P 500 had a 3.4 percent surge Monday, erasing the last of its 2009 losses, and the Dow was up more than 200 points. Leading the recovery:

A double dose of good housing news ignited the advance: Pending U.S. home sales rose more than forecast and had their second straight monthly gain, while construction spending rose unexpectedly in March after five straight declines.

More detail:

The rally came after the National Association of Realtors said its index of pending sales for previously occupied homes rose 3.2 percent to 84.6. That was well ahead of the 82.1 economists had been expecting and the second month of gains after the index hit a record low in January.

Separately, the Commerce Department said construction spending rose 0.3 percent, the best showing since a similar increase in September. Economists surveyed by Thomson Reuters had expected spending to drop 1.5 percent.

Does this mean we’re out of the woods? Possibly not. David Kotok, chairman and chief investment officer of Cumberland Advisors, notes that the real estate market is still weakening and banks are still taking losses on loans. He says the question is whether we’re looking at a “V,” a dip followed by a surge, or a “W,” with another big dip ahead. What do you think?

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