Real Estate Market Forecasts: Are They Inflated?



Mixed emotions and opinions about the economy and the US housing market are still afloat as we head into the new year. Some economists are bullish in their expectations for the coming months, but Gluskin Sheff’s chief economist David Rosenberg says investors are less than realistic if they think don’t look for major price declines to continue.

Recent studies do reveal unsold inventories are still extraordinarily high, normally a signal for price reductions to reduce inventories. Rosenberg told CNBC that investors have underestimated how fragile the US housing market still is, and that it represents a significant threat to both the economy and the stock market. He pointed out that tax and government intervention may have caused a false sense of security where the market is concerned.

The inflated home

Inflating housing numbers – isn’t this what got us into trouble?

Rosenberg should know, his portfolio management credentials are actually impeccable, but there are descendant views on the situation. Looking at these “expert” forecasts though, the best of them are selective and often regional. This is probably to be expected, recovering from this magnitude an economic disaster will be splotchy.  The hardest hit regional markets will likely see the biggest gains simply because of the margins there. But as Rosenberg so aptly points out, a market propped up by government incentives is a facade.

What will signal a rebound in the US housing market will be rising numbers of new jobs, the obvious correlation being the wisest of economic predictors.  America is not going to put millions to work building new homes either, all the banks are paranoid as it is about selling old ones. But even here, the tenor of discussion is unsure even in trusting the numbers. Bloomberg’s recent article about the jobless numbers reflects this in the first line;  “Employment probably rose for a third month in December.” We live in very unsure times of course, but the world’s leading financial analysts relying on “probably” is not the best sign.

So predicting how the housing market will trend in 2011 is a slippery slope for sure. A few things are abundantly clear for some though. When the bubble burst manufacturing jobs represented only about 11.5 percent of the US economy compared with almost 30 percent in 1959. NAFTA, and the so called “global community” have cost Americans dearly. Those pennies saved buying from Walmart sure have turned into hundreds now. America lost something on the order of 5.5 million manufacturing jobs since 2000. Can anyone see a correlation?

China manufacturing boom is US bust.

The rocket science of economics – jobs here means less there

It is our job to report the news, but when clarity is so abundant, can’t we go forward with programs and strategies that will reverse the current trend? Expecting a decimated workforce to gather its strength on promises is suicidal actually. Mr. Rosenberg may not be saying what investors want to hear, but he also may be more right than wrong if things in Washington don’t improve. Since when does Bloomberg not have access to Labor Department numbers? Joblessness “may be” on the rise too.  By the way, just being employed does not a homeowner make either.

The video below shows a less enthusiastic side of this argument. Besides jobs and market influences, government expenditures are not being taking into consideration fully.