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.”