Good news? Sell sell sell!

Remember during the dot-com boom, when good news about unemployment could torpedo stock prices? Investors would panic when unemployment data showed fewer people were out of work, because they were worried that the Fed would hike interest rates to keep inflation in check. Low unemployment can boost wages, raising costs and spurring inflation.

Same thing's apparently going on now with the housing market, where good news has Wall Street investors yelling sell, sell, sell!

Census Bureau and HUD numbers out today show housing sales up 16.2 percent in April over the previous month (see Inman News story). Home sales are still down 10.6 percent from a year ago, but the latest numbers suggest the housing slowdown isn't going to trigger a recession and that the Fed won't have to cut interest rates to jump-start the economy. Down go stocks.

Here's the lead from the AP story:

"Wall Street retreated Thursday after new housing data showed sales surged in April by the largest amount in 14 years, dampening hopes that an interest rate cut would be needed to stimulate the economy."

Why do we care? Because when mortgage rates go up, buyers can't afford to buy as much house. Mortgage rates are already up because of stronger than expected consumer confidence and the Fed's public statements about inflation worries (see story).

It's a very real feedback loop -- the better the housing market does, the less likely the Fed will be to do anything to help it regain its footing. With unemployment low and gas prices at record highs, it's hard to argue some of the worries about inflation aren't justified.

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