Barry Ritholtz Issues Mea Culpa on Housing

by Ross Kaplan on January 20, 2013

Don’t Fight the Fed — Housing Edition

“I am still aware of the inorganic nature of the improvement [in housing], but the key takeaway is a) US housing market down 35% eventually stabilizes; 2) do not under-estimate the ability of a determined Central Bank to impact any specific market it chooses.”

–Barry Ritholtz, “Mea Culpas for 2012“; “The Big Picture” (1/18/2013)

So, it turns out the uber-bears were wrong on housing in 2012.

Exhibit A?

Blogger Barry Ritholtz.

Devoted readers of this blog will recall that Mr. Ritholtz and I tangled (politely) over housing’s outlook — on these very pages – last Spring.

Burst Bubbles & Fed Intervention

Ritholtz’s take, in a nutshell:  burst bubbles don’t just revert to the mean, they overshoot on the low side; and banks’ overhang of foreclosures (“shadow inventory”) will swell supply and torpedo prices even further.

My rebuttal:  housing “Chicken Littles” had been perennially warning of shadow inventory — and been perennially wrong.

In fact, as I write this in early 2013, it appears the foreclosure wave crested nationally a full year ago.

Meanwhile, post-bubble stocks never overshot on the low side, thanks to the rather energetic efforts of Fed Chairman Ben Bernanke.

So why should houses?

I elaborated:

“Might Mr. Bernanke et al have taken any steps to “artificially prop up” housing the last few years? (ZIRP, tsunami-like levels of excess liquidity, currency debasement and its concomitant, elevated inflation, all come to mind).

Steps — I’d hasten to add — which are historically unprecedented, and that play out unpredictably and with notorious time lags.

And if so, why wouldn’t that result in a different outcome for housing prices, just like it has with stocks?”

–Ross Kaplan, “Barry Ritholtz Channels Vince Lombardi“; City Lakes Real Estate Blog (4/11/2012)

“But, But . . . “

Call it “inorganic,” “artificial,” “orchestrated,” whatever — the fact is, U.S. housing bottomed in 2011, and is now solidly rising in most U.S. markets.

When you’re wrong, you’re wrong — and for precisely the reason(s) I cited.

Sorry, Barry.

See also, “Why the Housing Bears Are Bearish“; “Spinning — and Backspinning — the Latest Housing Sales Numbers.”

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