CNN is featuring a great article that highlights how it’s difficult to believe what so-called experts predict will happen in the housing market.
Before you put much hope in forecasts for a 2008 rebound in the battered housing market, consider this: A year ago at this time many top economists were looking for that recovery to begin in 2007.
Instead, the year saw historic declines in nearly every measure of housing strength and home building, and left a trail of predictions from some of the nation’s top economists that look - at best - foolish.
Anyone can be an expert at anything. It’s about time a mainstream media outlet is reminding us of these incorrect predictions.
“A lot can go wrong here,” said David Wyss, chief economist at Standard & Poor’s.
“I thought we’d have problems, but I thought it’d be a smoother adjustment,” Wyss said about the problems that developed in mortgage-backed securities. “The financial side was much worse than I thought it was going to be.”
A year ago Wyss was forecasting a 7 percent drop in home prices from peak levels. Instead prices fell nearly 10 percent from the July 2006 record.
“Everyone thought I was nuts. Now it turns out I was an optimist,” he said.
There are two lessons to be learned:
- It’s difficult to predict exactly what will happen with the housing market (or any market for that matter)
- Don’t believe predictions from so-called experts
The build-up or inflation of the housing bubble was based heavily on speculation without much regard to market fundamentals. The future of the housing market will likely be determined by the same speculation, for better or for worse.
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