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Wait ‘Til Next Year
Frank Anton / Frank Talk / December 2011
Most Pittsburgh Pirate fans — I’m an exception — have something in common with almost everybody involved in the housing industry. Almost nobody in either group can imagine things getting better next year.
After enduring 19 consecutive losing season (a losing streak unprecedented in major league sports), Pirate fans expect another in 2012, even though the team improved in 2011 and has several good, young players. As for housing industry professionals, after enduring five consecutive years of declines in housing starts — and after getting fooled by the false spring of this year — very, very few are buying into the consensus 2012 forecast for an almost 20 percent improvement in housing starts to 700,000 units or so.
The pessimism around housing is understandable. Housing prices continue to fall, while the unsold inventory of foreclosed units keeps increasing. Job growth is anemic. Prospective home buyers face Inquisition-like scrutiny when they try to secure mortgage financing. It might be even harder to secure construction financing. And to top it all off there’s serious talk in Washington, D.C. about shutting down Freddie Mac and Fannie Mae and doing away with the mortgage interest deduction.
But just as this long-suffering Pirate fan always holds out hope for the Bucs next year, I can imagine a housing recovery that begins to gather meaningful momentum next year. Consider:
- The stock market has rallied, with home building stocks surging.
- GDP grew 2.5 percent in the third quarter, up from 0.4 percent in the first quarter and 1.3 percent in the second, and talk of a double-dip recession has quieted.
- Even as the index of consumer confidence has declined by about 10 percent this year, consumer spending — which is what really counts — has increased by 8 percent.
- Finally, for all of our problems, the United States still has it all over most of the rest of the world when it comes to technological innovation, higher education, strong capital markets, population growth, entrepreneurship, business leadership, decent labor/management relationships, and natural resources, including energy.
No, I don’t expect my Pirates to win the pennant next year. But they’ll be a little bit better. So will housing.
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