Economic Signals

The status of the economy has been the overriding national concern for the past several years.   Currently most analysts are saying that we are pulling out of the deepest recession in eighty years.

There are certain “signals” in the economy that can help even the average consumer anticipate what is to come economically, at least in the near term.

Over the past sixty years the housing market has been one of the key driving forces in the U.S. economy.  When looking at the housing industry there are several bits of information that can be seen as an economic signal or indicator.  New and Existing Home Sales can be seen as indicators of the direction of the economy.  Obviously if sales are up, that’s a good sign.

However; experts will look at some other data that may potentially give a better indicator or signal because they are considered “forward looking” indicators.  New Housing Starts, New Building Permits and Pending Home Sales are all bits of data that project economic and housing activity in the months to come.

Home prices can be a signal as to what is happening in the economy.  If the economy is growing then people will logically be looking to buy homes.  As home sales increase then home prices will follow, conversely, if homes are not selling then prices will fall.  This is an easy signal to see.

Interest rates can also be a signal.  Normally if the economy heats up too fast the interest rates will rise as a means of slowing growth to a non-inflationary sustainable pace.  If the economy slows too much, then interest rates fall as a means to put some spark into economic activity.   However, some critics say that rates were kept artificially low for too long, and that this complicated the current picture.

These are only a few of the indicators consumers can use to “read the tea leaves” of the economy.   Look also at jobs and unemployment reports, or manufacturing…get familiar with business news along with housing data.  Look for the bigger or broader picture nationally to determine the overall market and its impact on you and the economy.

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