Can Housing Stave Off A Recession?

For years, stock investors didn't pay much attention to the housing data as it went from bad to worse. It was mainly a side story to the Eurozone Crisis, the debt ceiling debate and other, seemingly, more pressing issues.

Over the years there were moments where government intervention, such as the first time home buyer tax credit program, seemed to put a floor under prices only to have them continue to decline.

But in 2012, the data appears to be turning higher without the backstop of new government programs (however, of course, the government continues to be heavily involved in the mortgage market.)

Home Builder Confidence Index Jumped in July

Yesterday, the National Association of Home Builders Confidence Index rose to a 5-year high of 37, above the expected forecast of 35.

While the index averaged 54 in the 5 years prior to the recession in December 2007, those were the go-go bubble years. In January 2009, at the height of the recession, the index bottomed out at 8.

More encouragingly, the index of buyer traffic rose to 31, the highest since May 2006.

Permits at a 4-Year High

Today, the Commerce Department said July permits rose to 812,000, the most since August 2008. Permits for single family homes rose 4.5% to 513,000.

Housing starts actually fell 1.1% to 746,000. This was under the consensus of 756,000. But June was revised higher to 754,000, the highest level since October 2008.

Analysts are putting more emphasis on the rising permits than the starts because permits give us a window into future activity and that is showing more growth.

Housing No Longer a Drag

Suddenly, housing, which had been the black sheep of the U.S. economy, looks like it is finally turning a corner.

While it is still well under the pre-recessioncontributions to the economy, it appears that it is no longer the drag it once was.

By the end of the year, could an improving housing market be America's secret ingredient to staving off a recession?