While There’s Good News in Housing, Keep a Watchful Eye on the Future

Leaders need to be always aware of their surroundings and the potential impact on their organization.  Let’s take an example from current economic headlines.

I have noticed in the news lately a lot of good news about the housing industry, and the good news is deserved.  Single-family home construction in January posted a 5.6% from December.  The increase is slightly steeper than normal, and therefore very encouraging and good news for the economy.  The seasonal decline since the July high, at -24.8%, is milder than normal, so clearly there is no pending crisis in this important industry segment.

There are two things to keep in mind in the midst of all this good news.  One, a typical length of rise in the annual data trend means that the recovery in single-family housing starts will end in August 2013.  The massive stimulus spending by the Federal Reserve Board could result in a longer-than-normal rise.

Second, the 12/12 rate-of-change for single-family home construction has established a tentative high in December with more decline indicated by internal factors.  The 12/12 decline is likely an early indication of a late-2013 end to this leg of the housing recovery and a leading indicator to the slow-down we are projecting for the US economy later this year.  There is a growing optimism in the media concerning the coming year; balance that off with a tentative indication that clouds are forming on the economic horizon.