For the third time since 2008, Barron’s has proclaimed a “housing recovery,” signaling that the housing market has hit “bottom.” Citing “unimpeachable signs,” writer Jonathan R. Laing predicted that the “rebound is for real” in a story titled “Happy at Last.”
Barron’s first called the housing rebound in July 14, 2008, in a front-page story (also written by Laing) titled “Bottom’s Up: This Real-Estate Rout May Be Short-Lived.” He followed that failed prediction with a similar front-page article in March 19, 2012, titled “Ready to Rebound.” In 2008, while well-known economists were predicting a 10 percent decline in home prices, Laing rosily wrote:
“Yet, such pessimism appears overdone, based on much recent data. Sales of existing homes are showing tentative signs of increasing, while the plunge in prices likely is nearing an end. Yes the supply overhang still is humongous, but at least the numbers are moving in the right direction, as even Treasury Secretary Henry Paulson noted last week.”
While sales of existing homes went up slightly in July and September 2008, they went down in October and November 2008. Sales rose slightly in December 2008, and dipped again in January 2010. The only reason sales started ticking up again in the spring of 2009 was federal government intervention in the residential real estate market, offering homebuyers tax breaks if they bought a home.
Meanwhile, while existing home sales were rising because of a $7,500 tax break, foreclosure filings were skyrocketing to astronomical levels, averaging over 300,000 a month from December 2008 to November 2010. Homes prices spiked a second time in the spring of 2010 because Uncle Sam juiced the market again with a centrally planned extension of the tax break. In other words, there was no “recovery,” the real estate markets were being manipulated by Keynesian government intervention. But wait, it gets better. Acknowledging that the S&P/Case Shiller Index for April 2008 showed a colossal 15.3 plummet, Laing crowed:
“Still other numbers suggest prices are close to bottoming. Buried in the (S&P) numbers, however, and widely ignored in the media, was the news that home prices actually rose, albeit slightly, between March and April, in eight of the 20 markets covered by the index (Boston, Charlotte, Chicago, Cleveland, Dallas, Denver, Portland, Ore., and Seattle.”
Instead, what really happened was a 10-month decline in the S&P/Case Shiller Index, from July 2008, when Laing wrote his fluff piece, until May 2009, when the S&P ticked up slightly. In reality, both the 10 and 20-city S&P/Case Shiller composites were languishing in a housing hole from May 2009 until May 2012, when we saw a slight uptick in existing home sales.
In the latest “Happy at Last” housing fairy tale, Laing and his editors at Barron’s want us swallow the Alice in Wonderland story that the “recovery” is here, and housing is out of the rabbit hole.
Indeed, the mad housing tea party is hardly over. With 12 million underwater borrowers on the housing ropes, short sales are rising. Moreover, the banks will soon fire up their foreclosure machinery now that the robo-signing scandal is behind them. And as we enter the winter months of 2012, the housing gains we saw this summer will freeze up as the cold weather sets in.
But Laing — ever the optimist — is predicting double-digit gains in home prices.
“Home prices are starting to rise, if somewhat haltingly, in most areas of the country. And a number of forecasters predict home-price increases around 10% or so nationally over the next three years, with some metropolitan statistical areas, such as Midland, Texas, and Bismarck, N.D., likely riding the energy-exploration boom to better than 20% jumps in residential-real-estate prices.”
A 20 percent jump in residential real estate prices? I’m glad I’m not getting real estate advice from Barron’s.
Search pre-foreclosure short sales, scheduled foreclosure auctions and bank-owned homes nationwide on RealtyTrac.
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