Should You Worry About More Bad Housing Numbers?

A drop in housing starts shows rising interest rates are biting – but it looks like a flesh wound.

Should You Worry About Bad Housing Numbers?
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"Improved home value helps by raising people's net worth and consumer confidence," Sorensen says. "Even if it slows a bit, the recovery to the higher home values we have already seen will sustain that confidence."

[See: A Step-by-Step Guide to Homebuying in this Market.]

The Fed's mandate is to watch inflation and employment. Housing is a key component of both. The Fed will be ready to apply more stimulus to get it back on track, Sorensen says. But it will also be ready to pull back if things get frothy.

That's not a prescription for a new boom in housing stocks and REITs, Sorensen says. After the big declines of the past month, they are now fairly valued, not bargain-basement buys, he says. Germain agrees that the housing sector, which has been leading the market higher during the economic recovery, is likely to take a more quiet role.

"People had a false impression on how strong the housing market was. It's still recovering. But it still hadn't reached what it was 10 years ago," Germain says. "A slow, steady recovery is what we really need. It's good to go through a summer chilling down."