walkitout (walkitout) wrote,

revisiting the housing market

Between following health insurance reform, the holidays, our trip to see the Mouse and a variety of other things, I haven't paid a lot of attention to either predictions regarding the economy or the housing market in particular (obviously, they bear some sort of relationship to one another, altho the details will probably always be hotly contested, except when everyone agrees on something and then it turns out that Everyone Was Wrong). I was catching up on e-mail, got one from the Lincoln Institute about the latest issue of Landlines and went to go read the article by Case of Case-Schiller on the housing market. Now, I've heard both Case and Schiller be interviewed, and I've read things by each of them, and of course I share the general respect accorded their replacement for the highly flawed median sales price metric for housing markets. As noted in a previous post, I was kinda shocked and appalled by how bad the article was (and I left out a lot of problems in that post).

I decided, rather than do a blow by blow on a guy who is so much the statistician that expecting him to use English in a reasonable fashion is, well, unreasonable, to go do a little digging around to find out what other people were saying.

The current prediction being floated by Case and Schiller in a variety of venues, and shared by a whole lot of other people (many of whom happily parroted whatever it was they thought Greenspan was saying, before his reputation ceased to be Wise Manager and became Serial Bubbler), is that the housing market might or might not be at a bottom (unspecified whether this is a volume or price bottom, and it does matter because they are not the same), and there is a chance that the various economic indicators that are looking ever so slightly positive might instead be replaced by a long slide further down. The predictions are structured in such a way that I harbor some suspicion that people are planning on saving these and quoting the parts that turned out right to burnish later, in the hopes that no one will actually slog through the crap to notice that they predicted most possible outcomes. (They didn't predict all possible outcomes. No one is predicting things are going to go to the moon any time soon, for example, either literally or figuratively.)

To some degree, this feels to me like bears being bears: there are people who trend follow, there are contrarians. And there are people who are always bullish and there are their natural opponents, those who are always bearish.

At first, I was profoundly irritated by this non-prediction. Why make it? Especially since it's actually a pretty consistent non-prediction showing up in a lot of places. People are predicting that 2010 will be the Year of Uncertainty.

Then I thought, oh, yeah, that's what happens at the turn. That's why Average Investor never enjoys the big gains at the beginning -- the few folk a standard deviation or two more aggressive grabbed all the cookies and fled the kitchen. Of course, if you go try to steal cookies while Adult Supervisor is still cleaning up after making them, you can get burned. There are real risks here.

And that led me over to the really painful real estate blog at the Globe. I got so sick of it, because people would tell stories based on personal experience (yay) and then come to a conclusion completely at odds with the story they just told (huh?). This happened so often, I gave up and did other things for a while instead (cf remark about following health insurance reform, but also my regular readers may recall the train obsession, and then NaNoWriMo back in November). Well, people are _still_ telling stories based on personal experience and then coming to an utterly incompatible conclusion, but the direction as changed. At least in the Boston area (excluding Southern New Hampshire), it really looks like we're past the volume bottom, and may in fact be done with the price bottom as well (altho that's debatable, and we won't be significantly off this bottom for a little while). It'll be interesting to see what happens over the next few years as all the shadow inventory starts to clear.

Dunno about the rest of the country -- and Boston is _not_ representative. But the people buying houses now are people who are buying for the reasons people should be buying, and they're doing it in a reasonable way. We got well below that when credit markets froze so hard even people with great credit and a substantial down payment couldn't get financing -- and people who could have bought rightly held off to see how it was all going to go down. But we're down, and we're coming back up. Hopefully we won't get back into that Everyone Can Buy a House crap.

ETA: A little further research today suggests that the Seattle area has not yet experienced either a volume or a price bottom. Seattle is also not representative.
Tags: economics, real estate

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