Number of the Week: Has Housing Bottomed? – Real Time Economics – WSJ

Number of the Week: Has Housing Bottomed? – Real Time Economics – WSJ.

A trope in MSM journalism since 2010 has been calling the bottom of the housing market. This article proclaims that we have hit the bottom based on the pickup in housing construction jobs for the last ten months. What is lacking for this analysis is discussion of the baseline. The loss in jobs was so large and steep that it created a very low baseline; hence, even the anemic job gains that we have witnessed over the past ten months look great in percentage terms. Just think, if there is only one construction job left in the country and we add one worker, we have doubled construction jobs!

And check out this hopium to close the article:

Economist James Hamilton notes that even a modest recovery in housing could have a big impact on the economy. If the sector got back to just 4% of gross domestic product — “a share exceeded 87% of the time prior to 2005,” Hamilton notes — it could boost GDP by 2%.

What economist James Hamilton does not note is that this housing crash is the worst in American history, so it is unlikely that this recovery will behave like the 87% of years mentioned above. Don’t forget that sales figures and new starts are being inflated by artificially low interest rates. Rates cannot stay low forever, and then we will witness a second dive in housing prices.

 

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