Worse Than Expected. AgainBy
The news today about slumping sales of existing homes was awful. But it should not have come as a surprise, says Ian Shepherdson of High-Frequency Economics in Valhalla, N.Y., who has been proven correct month after month in his bearish forecasts for the housing market.
I just received a piece from Shepherdson in which he writes:
[M]any forecasters’ unwillingness to believe the evidence before their eyes—perhaps because nearly everyone making forecasts of the U.S. housing market is long and leveraged in said market; just a thought—meant the consensus was substantially undershot. Again.
In case you haven’t heard, sales of existing homes fell 8% in September to an annual pace of barely over 5 million. The supply of existing homes for sale, at the current rate of sales, rose to a record 10.5 months’ worth, implying more trouble ahead. The median single-family home price was down 4.9% from a year earlier. Shepherdson predicts that by next spring, the year-over-year price decline will be nearer 10%.
There’s no question that most economists and other observers (I include myself) underestimated how bad the housing crash was going to be. It’s fascinating to consider Shepherdson’s conjecture that forecasters were fooled because they own homes themselves and didn’t want to think bad thoughts.
Calling all apartment-dwelling housing analysts!