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Kelly Evans: A housing-led recovery

CNBC's Kelly Evans
CNBC

Thank you all for the feedback to yesterday's piece about the future of public schools. Most interesting was hearing from other parents who are doing all sorts of previously unimaginable things. 

One family, for instance, is looking to move to a lower-cost New York City suburb since they no longer need the commuter train; the wife can now work from home for the foreseeable future instead of going into Manhattan. Their kids are also now part of a growing, 100-person "learning pod" that costs families $50 a month for materials to teach their kids, so they don't need the public schools, either. The former teacher who started the program, by the way, is apparently earning more this way than she previously did at the school.  

And this family will get more house for their money--that is, if they can find one. They've been outbid on several already, including by buyers from Manhattan who are paying all-cash, over asking price. I've heard this a lot lately; our new neighbors were outbid several times in different towns before finally getting their house.  

And that brings me to today's housing report. The housing market is in a sharp, V-shaped rebound--and may well be helping the whole economy recover from Covid. The homebuilder confidence data yesterday wasn't just back to pre-pandemic levels; it just matched the highest level ever recorded in its 35-year history, from December 1998. As the trade group's chief economist observed, "Single-family construction is benefiting from low interest rates and a noticeable suburban shift in housing demand to suburbs, exurbs and rural markets." 

We saw that again today, when new home construction for July was way better than expected. Housing "starts" surged 22% from June and are only 7% below pre-pandemic levels, a gap that is likely to close quickly.  

This has huge positive implications for the U.S. economy--and it shows that the stock market's V-shaped rebound to date is not necessarily detached from reality or fundamentals, as we'll discuss with Michael Darda today. It reminds me of the famous Ed Leamer paper, "Housing Is the Business Cycle." Housing's collapse in '08-09 was a key reason that post-crisis recovery was so anemic. 

Just look at Home Depot's earnings last night; they reported a 23% surge in sales and a 25% leap in profit over last year. They're building three new distribution centers in Georgia to meet delivery demand, and hiring 1,000 more workers. The company's shares are up 30% this year. No wonder. The S&P 500, by the way, is about to close today at a new all-time high.  

This pandemic is reshaping America in ways that are so much bigger than the short and sharp recession we've just lived through. And this recovery isn't just about how quickly we can get back to normal--it's building out the new normal for society.  

See you at 1 p.m! 

Kelly 

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Twitter: @KellyCNBC

Instagram: @realkellyevans