Did the Housing Market Just Give the “All-Clear” Signal for Stocks?

What’s the biggest segment of the U.S. economy?

The housing market.

It regularly accounts for just under 20% of U.S. gross domestic product each year.

That’s why they say that as goes the housing market, so goes the economy and the stock market.

And today, the housing market just flashed a super bullish signal for the economy and stocks.

The most important leading metrics of the housing market are housing starts and building permits. How many homes are being built in the U.S. every month? How many permits are being filed to build new homes?

If both those numbers are rising, the housing market is improving.

Both of those numbers surged in May.

Building permits were supposed to rise just 0.6% last month. Instead, they surged higher by 5.2%.

Housing starts, meanwhile, were expected to actually drop last month. Instead, they soared by more than 20%!

This isn’t just a one-time bump. Permits and housing starts have both been rebounding for months. On a combined basis, starts and permits are now running at annualized pace of 3.1 million homes. That is up more than 15% from their low in January.

In other words, it increasingly feels like the housing market has turned a corner.

That’s important because when the housing market turns a corner, the stock market tends to turn a corner, too. 

Permits and starts bottomed in April 2020. Over the next 18 months, the stock market soared.

Permits and starts bottomed in April 2009. Over the next 10 years, the stock market soared.

Permits and starts bottomed in January 1991. Over the next 9 years, the stock market soared.

Lather, rinse, and repeat all the way back to 1960. When the housing market bottoms, the stock market bottoms, too. Over the next several years, the stock market soars.

Permits and starts bottomed in January 2023. Unsurprisingly, the stock market has been soaring ever since.

Looking at the chart above, you can see that these “cycles” tend to last for years. The housing market isn’t particularly volatile. When it starts to turn higher, it tends to turn higher for years.

Therefore, it looks like this housing market turnaround is just getting started. So is this stock market rally.

The Final Word

We think one of the best ways to play this stock market rally is in the overlap of the two hottest segments of the U.S. economy right now: Housing and Artificial Intelligence.

In fact, at the start of the year, we said one of our top stock picks for 2023 was a disruptive housing tech stock using AI to fundamentally reshape the multi-trillion-dollar real estate market.

Year-to-date, that stock has already soared more than 200%!

But we think it will soar another 200% before the year is over.

We just put that stock into our Ultimate 10X Portfolio, which includes some of our top AI stocks to buy now for huge returns in 2023.

That portfolio has been crushing it so far this year. But we think the party is really just getting started.

Click here to gain access to that portfolio before these stocks rally too much.

On the date of publication, Luke Lango did not have (either directly or indirectly) any positions in the securities mentioned in this article.