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.
