Every which way but down?
People who go on vacation don’t buy homes.
That, you would think, is self-evident. But when people aren’t buying homes, the number of homes being sold also drops. So if home sales dip in July, is this evidence of anything?
On Tuesday, some analysts said the boom was definitively going south, based on a report from the National Association of Realtors that sales of existing homes slipped 2.6% from June to July.
Yesterday, however, the Commerce Department reported that new-home sales hit a record high in July, up 6.5% from June. That sent some pontificators the opposite way, saying the boom lives on.
Some who have been predicting a gradual slowing of the robust housing market rather than a dramatic pop say they remain upbeat because mortgage rates are holding steady and because July’s dip in existing-home sales was small and its jump in new-home sales strong.
The doomsday talk about Tuesday’s numbers was “laughable,” said Mark Vitner, vice president and economist with Wachovia Securities. “The drop was not even statistically significant. Next month, we may find out that sales [of existing homes in July] were actually up.”
Analysts who have been seeing darker clouds ahead, however, say the reports do not allay their fears. They cite not only the drop in sales of previously owned homes but also data showing an increase in inventory of such homes, to the highest level since 2003, and a 5% drop in sales of condos.
But you see, those who make a living prophesying doom are undaunted by
Dean Baker of the District-based Center for Economic and Policy Research, who predicted a stock market collapse in 1997, three years before it hit …
Does that even count as a prediction when the ‘collapse’ merely drove prices back to where they were when Mr. Baker began worrying?
… said the contradictory numbers do not reassure him. “I still make the same analogy (link in .pdf) with the stock market,” he said. “I saw the bubble for technology and I saw that it would come, I just couldn’t say when it would happen. . . . If you ask me when it will happen for housing, I can’t tell you either.”
If you can’t tell us, sir, why not speculate?
He said, “If we get a big jump in interest rates . . . that would probably very quickly put a damper on the housing market. If mortgage rates stay more or less where they are, my guess is that it will take longer.”
Here’s the reality: nobody knows where the housing market will go in the future. One can draw parallels with other countries, speculate that it is heading south, and knowledgeably explicate the apparent dynamics. But that gets us no closer to being confident we know what’s up.
Predicting a downturn is like predicting rain; sooner or later you have to be right.
Think prices have peaked, Jethro?
