BYRON WIEN: One Part Of The Economy Worries Me

Byron Wien writes that he has "so much to worry about."

In his new monthly market commentary to Blackstone clients, the veteran Wall Street strategists identifies everything that worries him in the world today. Concerns include high stock market valuations, dysfunctional U.S. politics, and geopolitical turbulence in the Middle East, Eastern Europe and Asia.

On the economic front, most people would agree low inflation and improving employment levels are good things.

But Wien points out something that often gets overlooked amid all of the good news. He writes:

The one economic area I am concerned about is housing. With the improvement in employment and continued low interest rates I would have expected the monthly figures on housing starts, new and existing home sales, and mortgage applications for purchase to be consistently strong, but the data have been mixed. I wonder if there are some secular changes taking place in terms of more flexible lifestyles, as well as delayed marriages and family formations. Housing is a key component of growth, so this is an area that bears close attention.

Wien isn't the only one who has noticed this area of weakness. And with the prospect of higher interest rates, it appears that home prices will only become more expensive and less attractive to buyers.

Economists note that a big hindrance to housing is tighter supply. Cheap foreclosure inventory has been vanishing. Meanwhile, homebuilders are struggling to find workers to build and land to build on.

There's also the matter of people who no longer believe in homes as a good investment. After the housing market crash, many potential homebuyers think they'd be better off renting.

And let's not forget the fact that the housing market has been recovering for about five years. Many people interested in buying homes have already bought their homes.

There are plenty of factors holding back housing. At some point we'll probably have to think about housing as a drag.