Sonders: Housing Recovery Should Continue -- And Help Labor Market

Charles Schwab Chief Investment Strategist Liz Ann Sonders — whose calls on both housing and the economy have been quite accurate over the long term — says housing should continue to give the economy a boost in 2013.

“In an economy that continues to grow at a pace below trend, the lift from housing will become very important,” Sonders — who warned of a housing downturn in 2006 when few were thinking of it, and then said housing had bottomed a year ago when few believed it — says in commentary on Schwab’s site. She points to an array of indicators showing how much housing has improved over the past year, including homebuilder sentiment, home price gains, and declining inventories. She says the Housing Market Index from the National Association of Home Builders is also giving a good sign for jobs. “Over time, movements in the HMI have correlated very closely with movements in home sales and, most importantly, jobs (with a lag),” she says. “We’re are … now in the sweet spot in the relationship between the HMI, which tends to improve first, and the unemployment rate, which tends to follow with about a 15-month lag. Assuming the two remain closely aligned, we should continue to see a nice downward trajectory in the unemployment rate.”

“Housing has bottomed, and we’re heading into the typically strongest part of the home-buying season (spring),” Sonders concludes. “The multiplier effects are powerful and beginning to gain traction. There remain naysayers, but a lot fewer than there were a year ago.”