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Don’t Believe Everything WSJ Prints About Residential & Commercial Real Estate
October 12, 2009 by Neil · Leave a Comment
Dr. Pangloss is alive and well on the Opinion page of today’s WSJ. According to Brian Wesbury, “The Economic Recovery is Well Under Way.”
His two cents on the real estate market reads as follows:
Housing has turned the corner as well. After bottoming in January, new home sales are up 58% at an annual rate. Housing starts have also bottomed, housing inventories have plummeted, and home prices are on the rise. The S&P/Case Shiller 20-city index shows that home prices are up for two consecutive months and have risen in 15 out of 20 cities during the past three months.
The only data supporting that chimerical 58% number sources to an obscure broker report put out of the Reno market: “During March 2009, the report showed Washoe County had 366 sales of existing single-family homes, an increase of 58 percent from March 2008 and a 24 percent increase from February 2009.” If the WSJ fact-checkers uncover a broader source of data, please let your readers know.
Then, Wesbury trumpets the fact that housing starts have bottomed. When banks have not lent developers the capital to finish, let alone, start their projects for years now, this is not cause for celebration. The inference cannot be drawn that we are rising from virtually zero housing starts anytime soon.
Finally, Wesbury hangs his hat on the valuable, but still flawed, Case Shiller numbers. Since Case Shiller does not factor in shadow housing inventory, seven million shadow units are necessarily omitted from his flawed arithmetic. With half of all residential homes dragging around negative equity by next year, his optimism rests upon, at best, a woefully incomplete picture of the U.S. real estate market.
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