Wednesday, May 29, 2013

It Ain’t Over Yet

The housing market started to plummet as soon as the 2005 was over—and then, measured in the value of business done, it plummeted like one of those cars falling off the collapsing bridge. Here is a chart from an earlier posting. In effect we’ve had a period of seven years and five months in which the housing market was dead in the water, and ship taking water on top of that. Obviously time enough had passed so that natural demand for housing would begin to build up sooner or later. And now we have reports that housing is up. Not surprisingly, these figures are over-hyped. Consumer confidence is also showing gains, although these are not dramatic—and have been fluctuating up and down. But suddenly everything is all right again?

Don’t think so. The housing market must be viewed narrowly—and pragmatically. Much as the automobile market. Those two categories are basic. Sooner or later people must buy a house, must replace the car. And these two areas will therefore respond to actual need. But when we look at the economy as a whole, it is still treading water. In the most recent monthly employment reports, all of the gains were in the Services sectors. Construction lost jobs, Manufacturing showed zero gains, Mining and Logging lost jobs too. The real economy is still stirring in uneasy sleep.

The upsurge of optimism is a function of unreasoning exaggeration. Our media does not simply report the news—with proper additions of the relevant context. It behaves, instead, like a megaphone with a mind of its own. The message is “Housing sales are picking up, home values are on the increase.” What we hear is something else: “Great news. America is confident again and the bonanza will soon resume.” But it isn’t over yet. The fat lady is still in the dressing room. It will be a while until she rolls on the stage and starts to sing.

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