Economic Forecasting Requires a Good Dictionary
Posted by Steve Kleber on Feb 20, 2007
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, itâ€™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 didnâ€™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 CNNâ€™s Money.com headlines â€“ â€œMortgage Rates Surge; Highest Since Octoberâ€ (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 â€œsurgeâ€, which implies a dangerous trend. The word â€œspikeâ€ would be more appropriate since the long view of any statistical analysis is where you find accuracy and true trends. It certainly didnâ€™t have any affect on the Fedâ€™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 Fedâ€™s current decision and itâ€™s one that everyone in our industry can applaud.