JOURNAL: What’s brewing in housing?

Financial markets were hit with an onslaught of weak economic news across the housing sector recently. One of the most notable metrics was the plunge in the National Association of Home Builders (NAHB) Market Index from November levels.

Although a four-point move in the Index may not be significant per se, what made the slide so noteworthy was the trend it signified. The recent weakness shadowed an even deeper drop of eight points just one month earlier, making the move over the last two months the largest drop in the Index since October 2001.

Given the importance of the housing sector to the U.S. economy, the unexpected free fall in the Index sent investors scurrying for a safe haven. The sharp reaction across markets begs some fundamental questions; what’s driving the bout of current weakness? Are we finally experiencing a turn in tide in the U.S. economy?

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