I love it! Two of my top 10 financial writers disagree!
by Tom on July 20, 2009
in Market Musings, house prices
This makes me smile. Bill at Calculated Risk and Barry Ritholtz are two of the financial writers who I follow quite closely and who I’ve learned a lot from over the past few years. So, I have to chuckle when I read that the two of them don’t agree about what the housing starts information means.
Let me lay it out:
Barry says:
- Anyone who says we’re at a bottom in real estate is nuts. (Okay I’m paraphrasing but he is rather blunt)
- There’s not a chance we’re going to “flashback” to a healthy market any time soon.
Bill says:
Well, just read below what Bill says, and then tell me. What do you think?
(Hint – I’m with Bill on this one.)
Calculated Risk: Ritholtz: “Why are people calling a bottom for Real Estate?”
A few quick points:# If single family housing starts bottomed in January, on a seasonally adjusted annual rate (SAAR) basis, the 12 month moving average of unadjusted data won’t bottom until October or so (depending on the shape of the recovery). Using this method adds a lag to the analysis.
# Barry also conflates calling a bottom in housing starts with: 1) “a bottom in Real Estate” and 2) “a snap back”.
First, there will probably be two bottoms for Residential Real Estate. The first will be for new home sales, housing starts and residential investment. The second bottom will be for prices. For more on this, see: More on Housing Bottoms
Most people think prices when they hear the word “bottom”, and the bottom for prices usually trails the bottom for housing starts – sometimes the two bottoms can happen years apart!
Second, looking for a bottom in housing starts doesn’t imply “a snap back” in activity. As I noted yesterday, “I expect starts to remain at fairly low levels for some time as the excess inventory is worked off.”
