May 16, 2012
Demand Institute study has some specific predictions about the housing market
16 May 2012
Posted by Andrew Kantor
A new report from the Demand Institute concludes that the U.S. housing market will finally turn the corner in 2012. That’s good, and I agree, and it’s a reasonable prediction to make.
“The recovery of the housing market will have far-reaching impacts in the coming years across the United States and international markets as U.S. consumers increase their spending on buying, renovating, furnishing and maintaining their homes.”
A-yup. Even if the market doesn’t recover this year, when it does all those things are true. Can’t really argue.
What’s going to power the recovery? Rentals, especially by young people. “More than 50 percent of those planning to move in the next two years say they intend to rent,” says the report, and that will help reduce the housing glut as investors snap them up to meet the rental demand.
Certainly sounds plausible. Another reasonable prediction.
But then the report begins to lose its usefulness, going from making blindingly obvious predictions to incredibly (as in “not credible) specific ones.
“The housing market recovery will not be uniform across the country,” it says. “Some states will see annual price gains of 5 percent or more. Others will not recover for many years.” Um… duh?
Further, “There will also be vast differences within states.” (Emphasis mine.) Again, duh.
“Consumer industries including financial services, home furnishings, home remodeling will all experience shifts in demand and new growth opportunities.”
Now there’s a statement everyone should save, because you can use it any time, any place. If things are changing — as they usually are — of course consumer industries will experience “shifts in demand and new growth opportunities.”
And then we have the specifics:
- Average home prices will increase by up to 1 percent in the second half of 2012.
- By 2014, home prices will increase by as much as 2.5 percent.
- From 2015 to 2017, the study projects annual increases between 3 and 4 percent.
- …[T]he strongest markets could capture average gains of 5 percent or more in the coming years.
You can’t predict the weather accurately more than a few days in advance, and this report is predicting home prices through 2017? Seriously? Granted it’s full of weasel words such as “by as much as” and “could capture,” but even to make such a prediction is ludicrous.
Why does this stuff frustrate me so? Because it convinces people that it’s possible to make accurate predictions, as opposed to “having a random prediction actually come true.” Which is what usually happens. So people make decisions based on what amounts to having a chicken pecking the stock tables.
Yes, the housing market is probably going to begin recovering this year and into next. Prices for the most part should begin to rise. By how much? Who can say? There are simply too many variables.
So please, don’t be among those who expect specific things in the next few years. In a world where Greece could default, Iran could rattle its sabers, hurricanes can close oil refineries, and who knows what else — well, you really can’t predict all that much.
Or here for the full report (PDF).