If you’re a regular listener to The Money Show, you’ve probably deduced that we don’t put a lot of stock in what economists and economic pundits have to say about the present, and even less in what the predictions they make for the future. Here’s a perfect example why.
As reported in the May 9th edition of the Boston Herald, Wellesley College Economics Professor and “housing market guru” Karl Case, despite the doom and gloom most continue to predict re: the residential housing market, sees strong signs that the decline in the housing market has hit bottom and is ready to turn upward. Mr. Case (who is the “Case” in the “Standard and Poor’s/Case-Shiller home price index” – an oft-cited monthly measure of the residential housing market), bases his prediction on statistical evidence which illustrates that, over the past 30 years, every time a particular measure of housing “starts” drops below 1 million (which it did, recently), this has signaled the beginning of a turnaround in the housing market.
Now, we certainly hope Professor Case is correct. However, as we’ve stated many times before, as Mark Twain originally said, there are lies, damn lies, and then there are statistics. But, that’s not the point here. Rather, the point is that, recently, a well known Yale economist predicted that, not only isn’t the housing market about to turn around, but rather, price declines in home values in this downturn may be worse than those experienced during the Great Depression. Who exactly is the economist who made this particular prediction? Robert Shiller, who happens to be Karl Cases’s business partner and the “Shiller” of the “Standard and Poor’s/Case-Shiller home price index”.
What’s the point? Actually, there are two. First, when it comes to economists and economic pundits, you can always find one (and usually, many) predicting one of the numerous possible economic occurrences along a 180-degree spectrum that could occur in the future. Second, as to the general record of correctness of the predictions economists make, the old saying, “Hindsight is the only 20-20 vision”, holds true.