Economists aren't very good at predicting the future, and I'm only slightly better it seems. I was trolling through the blog looking at how the homes in some older posts had done when they sold, when I ran across this post. The post talks about a report by Esmael Adibi, director of Chapman's Anderson Center for Economic Research on the overall economy. You know, jobs, housing etc.
His predictions were woefully wrong. He predicted real estate would drop 21% in 2008 and bottom out at $258k in late 09. He did not see much happening in unemployment as he expected added healthcare jobs to offset losses in construction. Man was he wrong.....
Then I made my predictions. Mine were better, but even Mr. Pessimistic was to optimistic. I predicted we would drop closer to 30% in 2008 and another 10 to 15% on 2009 and that the median would bottom around $175K in late 09. I predicted unemployment would increase to levels higher than that of the early 90s.
How far off were we? Prices dropped north of 40%. So I missed by about 10% but the expert missed by 20%. For the median we will have to wait and see. But we are both obviously off. He is WAY off. The median for the entire IE is currently sitting at $158k I believe. It's still dropping and how much farther is anyone's guess. I don't think it will go much lower but then again I didn't think it would go this low.
On employment, the expert wasn't even in the ball park. How he could forecast no additional job losses in mid 2008 is beyond me. I think the village idiot could see them coming in mid 2008. I was much closer here, predicting losses higher than the early 90's. Unemployment peaked at around 12% back then. I think we are close to 13% currently.
Funny stuff to look back and see what we though last year.....
6 comments:
If they are good at telling the future, they'd be billionaires sipping drinks off some tropical beach, not making predictions.
As far as I've seen you have done a great job. The Media, AKA "The Administration's Propaganda Machine" is either incompetent or intentionally lying to the "People" and thereby artificially trying to stimulate the housing market. All the moritoriums, new foreclosure rules, modifications, etc will never work. The best things our foolish Administration could have done (and the most efficient with my tax dollars) is to have just increased unemployment benefits and let the housing market quickly repair itself. These new channels are trying to take chicken $hit and make chicken salad. Thank God we have honest people like yourself that factually back up the truth. I am sorry for all the people that are swept up in all the lies and hype and run out and buy a home thinking it is the best time. These administration/media losers cause the mess, saying everyone should have a home and they should have it now. They strong armed the banking industry. Stated Income and exotic products doomed the market. Why can't I apply for a job with a "Stated Resume." How about they just trust us when we file our taxes, call them "Stated Taxes". I don't know how many people I knew directly or indirectly where I was told they fudged their numbers (sometimes with the guidance of a broker) to get into their home. I shook my head, but it always came back that it the ends justified the means and it would work out for everyone.
While I do believe Mr. Mortgage has access to good solid data and properly analyzes it, I was disappointed by his Marxist socialist view to do principal reduction across the board. Perhaps he bought before the bubble popped and now has buyer's remorse. Why should I pay for somebody else's situation. They had an option, they could have rented. The same people would be furious if the government gave their neighbors new cars (and they did not get one) and said they would be raising all sorts of taxes so they could buy their neighbors a Lexus or Mercedes. Like that would actually fly with them. Yet they want me to pay for their modification (which is a principal reduction) or straight out principal reduction? They still have an option...walk away and take a minimal hit on your credit. Hell, they should be happy that they don't take the same horrible scar people did all the prior years for a single foreclosure. Whatever happened to accountability. My wife and I have 5 rental homes out of state. You bet we could have picked them all up for probably 50% to 60% of what we paid. She is a school teacher and we both wanted her to spend special time with our daughter who was born last December. The plan was a year off for bonding. The rental market sucked and after an eviction and 2 lease breaks all at the same time, we cashed out several thousand on 401Ks and she went back to work right away. Neither of us is complaining. We made choices, there are always risks. Now we have to make new choices. And nobody as sure as hell should pay for the challenges we face from "our" deicisions. If we ever reached a point where we could not afford them, well then we would walk but I would not expect nor want a principal reduction. Taxes for service "YES", taxes to compensate people's risky large financial purchases "NO."
Maybe in a few months all the people gambling in Vegas will want to recove half of their lost money for making a bad decision and losing $ betting on Red on the Rulet Wheel.
Well I got on a little tangent...but I was mad as HELL..and now I feel better :)
Read "The Black Swan", there's a chapter in there blasting the predictive ability of economists. It seems the more famous you are, the more likely you are to be wrong. In fact, economics is soo peudo science there are those who want it moved into the humanities with history and psychology. Economists are good at explaining the past but cab drivers are better at predicting the future.
Warren Buffett noted that: forecasts can tell you a lot about the forecaster, but they tell you nothing about the future.
I love your humble post. Economist are best at evaluating history and understanding it. They are not very good at predicting future results as you have found out. Gut, intuition and sometimes a dart boards work much better.
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