Not everything is great when it comes to the U.S. economy. Like money.cnn.com says, big retailers such as Target and Macy’s are struggling, wage growth remains sluggish, and the stock market continues to be volatile.
But the one part of the economy that is strong is the housing market. For the first time since 2008, new home sales hit their highest level. Another way you can gauge the housing strength is through Home Depot and Lowe’s. Both are reporting strong earnings in the last week.
Due to a rebound in housing sales and home prices, Brinker Capital senior investment manager Thomas Wilson says he expects consumers to start spending more. "There is a trickle-up effect. More first-time buyers are entering the market, which makes it easier for people to sell," he said.
Wilson also says there’s no need to start worrying about another real estate bubble like the one we had in the mid-2000’s that helped lead to the subprime mortgage crisis. The cause of the most recent downturn rarely has anything to do with the next one. And the recession before the one in 2008 was largely a byproduct of a tech bubble in 2000. It had nothing to do with the housing market. "Normal recessions are caused by excess somewhere in the financial system," said Eric Marshall, manager of the Hodges Small Cap fund.
Not all parts of the country have recovered from the 2008 downturn. The huge pullback in oil prices certainly didn’t help the housing weakness in some markets. But if this latest recovery lasts, home sales and prices in places like Texas, Louisiana and North Dakota could bounce back too.
Some prospective homebuyers might act more quickly, too, since the Federal Reserve is indicating it might raise interest rates.
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