One of the biggest engines of the American economy is the housing sector -- and, more specifically, the markets for new and existing homes.
It's for this reason that America's smartest investors will be closely watching two reports this week that will shine a light on the strength of the ongoing recovery.
Existing home sales
The first is the monthly report of existing home sales, which the National Association of Realtors is set to release on Monday.
Just to be clear, this is the single most important indicator related to the housing sector. Not only are 10 times as many existing homes sold relative to new homes each year, but it is also a key indicator for a multitude of peripheral businesses and industries.
As we look at the macro, we think housing will be a contributor to our growth next year of about 200 basis points. We think it contributed about 250 basis points in 2013.
According to the National Association of Realtors, existing home sales rose by 1.3% in April compared to March but were still down by a disturbing 6.8% on a year-over-year basis -- click here to read the official NAR statement.
New home sales
The second and related report is the monthly release of new home sales, which the U.S. Census Bureau will publish on Tuesday.
The home building industry was hobbled during the financial crisis and has only lately begun to reassert itself with any semblance of strength. This crippled the economy, as it's estimated that each new home built generates between two and three new jobs.
When this data was last reported, the Census Bureau observed that, like existing home sales, the pace of new homes increased in April by 6.4% compared with March, but they were down by 4.2% relative to the same month last year.
How will these figures come out this week? It's hard to predict, but investors can rest assured that a large surprise either way will reverberate through the markets.