Economic Forecasting Requires a Good Dictionary

Posted by Steve Kleber on Feb 20, 2007

headlines sometimes tell the real story At Kleber and Associates, we watch the national and housing industry economic newswith a passion and contemplate its possible effects on the homebuilding and remodeling business. Like our clients, we want to know what we can expect in the coming year so that we can make sound business decisions that will lead to profitability.

Sometimes, it’s not easy to separate the journalism hype from the fine print, the greed from the blessings and the statistical extremes from the mean average. We depend on accurate reporting and forecasting to help us project the future and fate of the economy.

When the forecasters took a narrow look at the home buying slow-down, and started declaring that the sky was about to fall, we took a look around and didn’t really think this was going to be the case. Our economy has performed beautifully. So, it was with some aggravation that we read and ignored CNN’s Money.com headlines – “Mortgage Rates Surge; Highest Since October” (Feb 1, 2007). This amounted to a .09 percent change from the previous week and a .11 percent change from LAST YEAR.

This is hardly a “surge”, which implies a dangerous trend. The word “spike” would be more appropriate since the long view of any statistical analysis is where you find accuracy and true trends. It certainly didn’t have any affect on the Fed’s decision to leave the target short-term interest rate unchanged. These are the people with the power.

They indicated that there are tentative signs of stabilization that have appeared in the housing market. Even though 2006 was a year of significant decline in housing activities, it will still be noted that to date, it remains in the top three years for total home sales in the history of America. Our strong 3.5% annualized growth and slowing inflation capped the Fed’s current decision and it’s one that everyone in our industry can applaud.

This entry was posted by Steve Kleber on Tuesday, February 20th, 2007 at 4:00 pm and is filed under Housing Market. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.