Mixed Signals in Housing

Some grim news from the housing market this week: New-home starts in June were down 5 percent from May and fell to their lowest level since October. The expiration of the $8,000 tax credit for first-time homebuyers is the likely culprit. The decline here in the Northeast was the worst in the nation, dropping by 11 percent. The National Association of Realtors said that homebuilder sentiment has fallen to its lowest level since April 2009.

But at the same time, three key homebuilding stocks rose on the day yesterday: Lennar was up 4.6 percent, Pulte up 4.3 percent, and Toll Brothers up 3.9 percent. Why would they do this, if the housing picture looked so dire? Because building permits were up, rising 2.1 percent in June over the May figure.

Remember, the number of housing starts in June constitutes old news, and doesn't have anything to say about homebuilding companies moving forward. The number of homebuilding permits issued speaks to what's going to be happening to the housing industry in the days ahead. When it comes to the stock market, forward-looking data carry much more weight than backward-looking data.