Housing Policy

The Media's Incredible Ability to Spot an Invisible Housing Recovery


Today I've received some ironic pushback on a column I wrote for RealClearMarkets. The gist of my argument is that the recent rise in housing prices is in part the result of millions of foreclosures have been delayed, and that it is short-sighted thinking to see this as a housing bottom.

The irony is that the pushback has cited the very articles I'm suggesting are shortsighted. The media has a pattern of buying into short-term trends and pushing the idea of recovery when it is really nowhere in sight. And if you doubt that, here is a small sampling of failed optimism from the past few years:

February 2009: Bloomberg News & Moody's Chief Economist Mark Zandi

"U.S. home prices will reach bottom by the end of the year, concluding a slide that will have cut values 36 percent, Moody's Economy.com said today. 'Notwithstanding the intensifying economic gloom, the bottom of the housing downturn is within sight,' chief economist Mark Zandi said in a statement today."

June 2009: NY Times

"Construction of new homes leapt back in May after dropping sharply a month earlier, the government reported on Tuesday, signaling that the housing and construction markets might be hitting a bottom."

January 2010: Freddie Mac CEO Charles Haldeman

"The U.S. housing market may at least be nearing a bottom after its worst downturn since the Great Depression, Freddie Mac FRE.N Chief Executive Charles Haldeman said on Tuesday. 'The numbers will always bounce around some, but from home sales to house prices, it appears that nationally we may at last be approaching a bottom.'"

This was echoed that same month by Denis Lilla, vice president of sales for Jack Conway & Co., a Norwell-based real estate brokerage, "I think the bottom has been reached… I don't think it's a flat bottom. It's a murky bottom: It's still going to go up and down a little bit, but the trend is generally going to be upward."

June 2010: Standard & Poor's

"Southern California's housing market appears to be bottoming out after one of the nation's worst drops and its pattern may be repeated across the country, Standard & Poor's Ratings said in a report released on Tuesday."

Today, seven of the top ten cities facing the foreclosure wave are in California.

November 2010: Fannie Mae

"Total housing sales in 2010 will be down about 8 percent from last year, and will mark the bottom of the downturn, says a monthly report from Fannie Mae economists… Fannie Mae chief economist Doug Duncan said home sales are expected to increase by about 3 percent in 2011, with the pace of recovery determined by labor conditions. Improving financial conditions and recent encouraging signs from the labor market should set the stage for an above-par growth trend by mid 2011, the report says."

December 2010: Bill McBride, CalculatedRisk 

"I think it is likely that nominal house prices will bottom in 2011, but that real house prices (and the price-to-income ratio) will decline for another two to three years."

September 2011: RealtyTrac

"The U.S. housing market will hit bottom this year and remain flat until 2014, when it will start to slowly recover, said Rick Sharga, an executive vice president with Carrington Mortgage Holdings."

January 2012: NY Times

"There is growing sentiment among home builders and economists that the bottom has been reached and construction will increase in 2012. Builders are securing more permits, and the pace of housing starts rose in the fourth quarter… there is reason to think the records set last year will endure."

February 2012: Bill McBride, CalculatedRisk

"For new home sales and housing starts, it appears the bottom is in, and I expect an increase in both starts and sales in 2012… And it now appears we can look for the bottom in prices. My guess is that nominal house prices, using the national repeat sales indexes and not seasonally adjusted, will bottom in March 2012."

June 2012: David Wessel, Wall Street Journal

"The housing market has turned—at last. The U.S. finally has moved beyond attention-grabbing predictions from housing 'experts' that housing is bottoming. The numbers are now convincing."

All that leads up to the grand finale, a Yahoo finance story from Monday:

"The latest reports on new and existing home sales seem to indicate that the housing market is beginning to find its footing again. While most believe the recovery will be slow, U-shaped, and bumpy, the free fall appears to be over for both sales and prices."

Then again, it's not as if Reason got the story right in past either. 

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  1. “There is growing sentiment among home builders and economists that the bottom has been reached and construction will increase in 2012.

    I love that little trick. You can say anything is true even if you have no support for it. Just say “some say” or there is “growing sentiment” and voila you have a fact even though you have no evidence or support for it.

    1. Some say the John likes fat chicks. In fact there is a growing sentiment that he’s a chubby chaser.

      1. Viola there you go. Anyone can play that game. Forget the daily fail, you need to be working at the New York Times.

        1. What does former Met Frank Viola have to do with your fetish for chicks bigger than me?

      2. ok, this is the first time I’ve laughed at the sarcasmic/John/Dailymail thing in months.

        not that I mean to encourage it.

    2. We call those weasel words on Wikipedia, and they’re a big no-no.

    3. I sure wouldn’t want to invest in a company that based big-dollar, make-or-break business decisions on sentiment, either. Home builders tend to be a little more careful than that. Avoiding bankruptcy is a powerful incentive.

  2. Here is SoCal, the housing market is recovering. Prices haven’t come up much from the bottom, but decent houses are selling fast again. Part of it is just people wanting to buy before the mortgage rates go up though.

    1. Part of it?

    2. Part of it is just people wanting to buy before the mortgage rates go up though.

      Which is a false economy since house prices will drop – probably precipitously – as the mortgage rates go up.

  3. I can’t hear anything over the sound of heels clicking together.

    1. Hugh, are you wearing your Dorothy outfit again?

      1. No, no. Hugh’s furry suit has high heels, is all.

        1. Yiffing in high heels takes a certain amount of talent.

          1. The tail helps with balance.

  4. You’ll know the recovery is underway once they start doling out bad loans again.

    1. That’s a bingo!!

    2. They already are. My incredibly irresponsible friend got a mortgage from a credit union for a house he can’t afford.

      They loaned him the closing costs, too.


        This country is doomed.

  5. You know who else saw an invisible recovery?

    1. Ray Charles?

    2. Mary Magdalene?

    3. Michael Jackson’s doctor?

  6. I can feel the momentum baby.
    We’re turning this behemoth around.

  7. Ever so slightly off topic: Paul Ryan black ex!


    1. You had to post it here. I don’t think they’re going to do another Paul Ryan thread any time soon.

    2. Ah-ha! This proves he’s a racist!

      1. He’s playing the long game. He’s a crafty one.

      2. Why else would he have broken up with her?

        1. He probably burns crosses in front of his brother’s house all the time.

          1. Who doesn’t?

            1. I’m an only child. I had to settle for a fortnightly light throttling of my brother-in-law. Of course, I stopped after the sick bastard started getting an erection every time. Some people just don’t understand the depths of my hate.

    3. Did she leave him over his Eddie Munster Haircut?

    4. They shut down comments on the article. Those must have been venal.

    5. How did he manage to go back?

      1. He shouldn’t have.

  8. This “bottom” coincides with historically (and artificially!) low mortgage interest rates. House prices are largely set by the monthly mortgage payment that buyers can afford; when those rates go up, prices will go down, down, down.

    And here’s the funny thing: when rates are this low, a small increase (call it 1%) in the rate is actually a large decrease in what the buyer can afford.

    At current 3.5% rates for a 30 year fixed, your monthly PI on a $200K loan is $898. At a 4.5% rate (the average a year ago), that monthly only gets you $175,000.

    1. Yep (you beat me by four). I’m having great difficulty convincing my son-in-law that buying a house now “before interest rates go up” is a grave mistake. His parents, who don’t know squat about finance and investing, are beating up on him to “not miss this once in a lifetime opportunity”.

      1. It has to do with your time frame and intentions.

        If you are very confident that this is the last house you will buy for a very long time, or that you will pay it off before you sell it, now’s probably a good time.

        But for the usual schlub who will only own the house for say, 5 – 8 years, well, you’re looking at pretty much a guaranteed downleg in the market, IMO.

        1. I’m looking at the possibility of inflation and not moving for at least a decade, hopefully more. I figure when inflation kicks in, I want that house note in today’s dollars.

          Plus, the wife is unhappy, so therefore, we’re buying soon. Financial considerations sometimes take a back seat to other considerations.

  9. I find today’s listy posts annoying.

    1. It’s just cut and paste.

    2. Give us your top 5 reasons why.

  10. I love these “recoveries.” They’re almost as good as the real thing, except without the money and hopes for the future.

  11. Another shot of hopium, please.

    1. I’ll stick to the maybejuana.

  12. Seattle Times keeps trumpeting housing price increases.

    My neighbor seems to think there’s a recovery. He kicked the renters out and put his fixer-upper back on the market (for the third-maybe fourth time since 2007) for around $400,000.

    I’ve been watching people tour it with the realtor, then leave. Sign’s still up out front.

  13. It’s like the psychics who keep predicting the end of the world.

    Sometime in the next 5 billion years, they will be right. (Unless we find a way to stop the sun from entering the red giant phase or move the earth in the meantime.)

  14. Doesn’t the market have to hit bottom before it recovers?

    Our masters seem intent on that never happening.

  15. What you have to realize is that real estate coverage is all written by freelancers whose primary jobs are all in the real estate or mortgage industries.

    “Now is the time to buy!” will always be the primary message those judas goats want to put out there.

    1. I want to brick through my TV, every time I see one of those “America’s Realtors?” commercials.

      Fuck you, you rent-seeking, goat-rimming parasites.

  16. I don’t give a shit where the bottom is, so long as someone takes my fucking house off my hands soon. I’m pretty much committed to letting it go at cost just to be rid of it. Worst case scenario, I guess I’ll be stuck renting the damn thing out.

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