The definition of an economist is “someone who will tell you tomorrow why the things they predicted yesterday did not occur.” These guys are relied on by all financial reporters for accuracy but have a MUCH worse record than even our weather forecasters. For example, the durable goods report today showed an increase of .3%. However, the 75 economists surveyed by Bloomberg.com predicted increases ranging from 1.2% to 6.8% with a median of 3%. That is correct, 0 of the 75 economists came within 1% of the actual number and the average was off by a whopping 3.3% (which is huge when you measure in tenths)! I write this not to castigate economists (though I will note that if my predictions on mortgage rates was this bad I would have been out of business before the turn of this century), but rather to show how out-of-touch and out-of-sync the predictors and reporters are with the current economy.
I know that, after 15 years in the mortgage business, when our loan pipeline is 90% refinances with purchases being few and far between, the housing sales are not doing well. When this is coupled by the fact that other than a $1.1M deal from a European buyer and a $1.5M deal from a semi-celebrity all the other purchases in our office are in the $150k-$450k range, the market is not healthy. First time buyers who are buying out of necessity (often) or taking advantage of low prices and low interest rates cannot sustain a housing market. The complete absence of the mid range of the market (defined by me as $600k-$1.5M) indicates that the housing market is not improving and may still be in decline. I don’t need all sorts of fancy statistics on inventory, ratios or the like to know this. It just is.
So, rather than asking economists to use quantum physics or whatever other high-brow analysis they do, to incorrectly predict housing, etc., maybe we should just go back to the campaign slogans of the recent past and inquire of people: “Are you doing better than last year?” As simple as that, until the majority answer is “yes” we will continue to see a slump in housing sales. Sorry to be the bearer of bad news there. But, as we learned to say in law school “It is, what it is.”