For some reason the almost constant chatter about reaching a bottom in the housing market has hit an even higher high lately.
But still with no clear evidence whether you should jump in or stay seated. Some say we're there, while others continue to see nothing but a long dark hole. In this article The NY Times consults with some of the experts in the field and explores the different methods they use to draw their (conflicting) conclusions. Step right this way
From today's New York Times In Their Various Ways, Economists Try to Find Right Price for a Home
By CATHERINE RAMPELL
Published: August 8, 2008
Let’s be honest. No one actually knows when and where the housing market will bottom. Experts have been proclaiming the bottom is now — this very moment — since Alan Greenspan notoriously predicted the worst was over way back in 2006.
“I try to avoid house price forecasting,” said Paul S. Willen, senior economist and policy adviser at the Federal Reserve Bank of Boston. “Let me just say this, as an economist, that asset pricing is something we’re exceptionally bad at.”
In the chart below, three economic models - from Columbia Business School, Moody's Economy.com, and the U.C.L.A. Anderson Forecast -take a shot at indicating the level of over or under valuation in home prices in 10 cities at the end of March.
**Click the Chart to make it larger & legible
And as you can see they're all over the lot.
For Phoenix, Moody's said +13% overvalued, Columbia came in at +40%, and UCLA at +44%, In L.A. Moody's was +9%, Columbia +22% and UCLA +34%.
And these studies did NOT attempt to forecast the future of home prices, but simply to gauge the existing degree of over or under valuation in those 10 cities at that time. And if they can't agree on that, how the heck can they predict where prices are going to be in the future.
“Anybody who says they know when it’s going to end with confidence is delusional,” said Karl E. Case, an economics professor at Wellesley College and co-creator of the Case-Shiller home price index. “But yes, you can get a sense of where things are going.”
In Their Various Ways, Economists Try to Find Right Price for a Home
If you're confused about housing prices, reading this article won't clear that up, but you'll feel as if you're in better company. Join the club.
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