Get Blog Updates on your iGoogle homepage:
| Perhaps the Rear View Mirror Isn’t the Best Way to Look Forward |
| Written by Jonathan Smoke | |
| 03.25.2008 | |
Discuss this article on the forums. (0 posts) This is one fickle market. Yesterday optimism reigned as existing home sales for February seemed to indicate that a bottom had been or was being reached in the housing downturn. While I wasn’t impressed with the strength of the signal, I did see the glass as half-full.Today we did a u-turn based on the S&P/Case-Shiller January index release and the March release of the Consumer Confidence Index from the Conference Board. Today I will argue that both these readings are poor indicators of what the real road immediately in front of us looks like. On the home price index front, what we learned today is that home prices were down year-over-year nationally and in 19 of 20 covered MSAs in January. While I do believe that these repeat sale indices are the best measures of past home prices in the markets they cover, they are not leading indicators. After all, they existed and helped no one avoid this current mess. Consumer perceptions are much more of a leading indicator, but I believe you must interpret consumer sentiment readings very carefully. Consumer confidence may adequately measure how consumers feel at a point in time, but those feelings are very subjective and influenced by what consumers are hearing. Up until this week, the news in 2008 has been all negative: recession, rising price of oil, unemployment rising, home prices falling, foreclosures rising, credit disappearing, stock prices falling. I caught a snippet on CNBC that the one bright spot in the new March Consumer Confidence data was that plans to purchase a home increased. Now that would be a relevant indicator, and a robust anomaly in an otherwise dismal data set. After all, if consumers felt poorly about the economy, jobs, incomes, etc. yet still planned to purchase a home in 2008, that would tell us that sales may pick up more than we’ve seen already in February. Unfortunately, the home purchase plan reading isn’t in the Conference Board press release. If you have access to the data or know where the March result is published, please comment or contact us so we can tell our readers what that leading indicator may tell us about where home sales and home prices are going. 
We're always looking for feedback from our readers.
|
| < Prev | Next > |
|---|
