Is The Stock Market Telling Us Home Building Will Soon Pickup?

The stock market is a leading indicator for the future economy. The rally in the markets is a confidence in the future profits of companies and the economy as a whole.

The SPDR S&P Homebuilders Index ETF (XHB) is an index of home building, consumer durables, capital goods and retailing stocks. Some examples of stocks in the index are Toll Brothers Builders, Owens Corning, Sherwin Williams, Home Depot etc. Here is the link to the index website.

The XHB index has rallied for the majority of the year, while the physical housing market has yet to really pickup. Is this telling us that the housing market and home building markets are about to turn around? Will things in the home building industry get better soon? Being that we are in the residential heating and cooling industry, I hope so. There is a saying that the stock markets predict what will happen six months from now. If this saying holds any weight. We should see a pickup in the 4th quarter of this year.

Being a micro-business, sometimes it's hard to gauge what's going on in the local markets. You can learn a lot at the supply houses and on job sites, but you need to take that information with a grain of salt. The builders that we do business with are too small to really gauge the markets as a whole. Using as much market data as possible can help to give a time line of when things may be looking up. It may not be specific to your local market, but you can be sure that it will affect it at some point.