I linked to a story about forecasters a few days ago but it’s still got me confused.

These days, housing prognostication is big business (I do a little prognosticatin’ myself). There are a few people that I watch closely and in fact, several that I fawn (is that a word?) over. But I was taken aback by the USAToday/Atlanta Fed’s rankings of the most accurate forecasters out of a pool of often quoted economists.

It was done anonomously so the analysts would not be swayed by personalities they were covering:

Atlanta Fed economist Tao Zha and Fed programmer Eric Wang analyzed the quarterly predictions to determine the most accurate forecasters. Zha and economists Robert Eisenbeis and Dan Waggoner had previously developed the methodology. Rather than assessing the accuracy of each forecast variable separately, as is commonly done, the economists used statistical methods to assess the joint accuracy of the predictions. The Atlanta Fed economists did not know the identities of those they were evaluating.

David Berson, formerly of Fannie Mae and now of PMI, has long been one of my favorites, as well as Mark Zandi of Economy.com. Nariman Behravesh of Global Insight and Ethan Harris of Lehman are on the list and I enjoy reading their work. The remainder on the list I am not familiar with.

However, several prominent economists were not ranked, and I am not sure what that implies:

David Rosenberg of Merrill Lynch, a bear, pumps out a lot of interesting work and I enjoy hearing him speak often on Bloomberg.

Robert Shiller, perhaps the most widely quoted economist out there, was not on the list. He is the author of a best selling book and co-creator of the Case Shiller Index.

Nouriel Roubini, an often quoted economist for bloggers and the media, is perhaps the most negative forecaster out there, yet he is a terrific public speaker (just make sure you are euphoric before you hear him speak).

What caught my attention was the inclusion of Lawrence Yun of NAR as the 5th most accurate forecaster. I found that shocking, actually. I am sure he is a nice person and works very hard, but he has made some of the most amazing comments about the state of the housing market each month that have nothing to do with the data that is released. Perhaps that’s the problem. It’s not the data (that was analyzed) it’s the delivery of the message.

Here’s an example.

Today, NAR’s Existing Home Sales stats were released:

Sales of existing homes increased in February and remain within a fairly stable range, according to the National Association of Realtors®.

Existing-home sales – including single-family, townhomes, condominiums and co-ops – rose 2.9 percent to a seasonally adjusted annual rate (1) of 5.03 million units in February from a pace of 4.89 million in January, but remain 23.8 percent below the 6.60 million-unit level in February 2007. The sales pace has been in a fairly narrow range since last September.

Here are NAR’s hard numbers.

Lawrence Yun, NAR chief economist, said the gain is encouraging. “We’re not expecting a notable gain in existing-home sales until the second half of this year, but the improvement is another sign that the market is stabilizing,” he said.

How can you issue a press releasing relying on the change between January to February to be a sign that the market is improving?

Sales are generally slowest in January. The change in sales from the prior February was down 23.8% and prices over the same period are down 8.2% yet the headline says the market is stabilizing?

Please tell me what the basis is for that headline in the facts that were presented or any external changes in the mortgage/credit markets and the economy? Am I missing something here?


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4 Responses to “[Rank Forecasts] Rankled By Rankings, Prognostication At Its Finest”

  1. clark says:

    As an owner of a high priced UES coop, I am extremely depressed to read your recent blogs. Not that the blogs were by themselves depressing nor that they weren’t informative. The issue is your newly-found productivity.

    I am worried that this frenetic level of output may be a direct indicator of a major decline in NYC real estate activity and prices. In the good old days of robust sales with double digit price increases and double digit declines in inventory, you produced two or three blogs per week. Maybe four on occasion.

    What do we now see: three blogs yesterday and five today! EIGHT F-ING MESSAGES IN 24 HOURS! And these as basketball playoff excitement is rising to a fever pitch!

    The ONLY, ergo, depressing conclusion is that the appraisal business has ground to a halt. Even Miller Samuel, one of the few credible survivors, doesn’t have anything to do but compose blogs.

    Say it isn’t so, Jonathan. Say that you’ve hired a ghost writer……..which did cross my mind given how few typos I found……and that you, Sheryl and the boys been appraising non-stop throughout the Easter weekend……at higher and higher prices. Anything else leads to a frightening conclusion.

  2. Jonathan J. Miller says:

    Hi Clark – good to have you back! Yeah, I was unusually productive as of late – attributable to elevated jellybean consumption. Nothing to suggest anything other than I am now more focused on Miller Samuel and the New York market than ever. No ghosts in this machine.

  3. mike says:

    a bit off topic, but i really enjoy reading your posts and think you have valuable insights.

    I was talking about real estate with a friend of mine (who doesn’t these days) as we are both in the market. Probably buying at the top but I rationalize it as; I’m having a baby this year so need to step up to a 2 bedroom with an elevator. I can rent for about 5k (I’m in the west village) or buy a place for net cost of $6k. my timeline is 5-10 years so in the chance prices are still down, I’ll rent it out. To which my friend adds – there are some fundamental changes in the market that may help keep things elevated. He mentions popular things such as foreign buyers, but then adds one I had not thought of. He has been in NY for over 20 years and thinks that the city is only recently becoming a place to “live” i.e., with a family (down town more specifically). He thinks it has historically been more transient. Now as people get older instead of moving to the suburbs, they want to stay in the city.

    And he is right in at least my little world of the west village. 5 years ago when I moved there it was mostly single people, now you trip over strollers, baby stores and pet stores are popping up all over, and the tiny little restaurants with 5 chairs have long been replaced with high end places.

    By the way I don’t think any of this is negative, just changing.

    If that is true, it could help explain some of the immunity to price declines (along with all the usual suspects). Before I go digging up demographic data, thought you might have a view.

    Thanks again for all the good info

  4. mike says:

    hope this did not dup – apologies if it did

    i know this is a bit of topic, but:

    I was talking about real estate with a friend of mine (who doesn’t these days) as we are both in the market. Probably buying at the top but I rationalize it as; I’m having a baby this year so need to step up to a 2 bedroom with an elevator. I can rent for about 5k (I’m in the west village) or buy a place for net cost of $6k. my timeline is 5-10 years so in the chance prices are still down, I’ll rent it out. To which my friend adds – there are some fundamental changes in the market that may help keep things elevated. He mentions popular things such as foreign buyers, but then adds one I had not thought of. He has been in NY for over 20 years and thinks that the city is only recently becoming a place to “live” i.e., with a family (down town more specifically). He thinks it has historically been more transient. Now as people get older instead of moving to the suburbs, they want to stay in the city.

    And he is right in at least my little world of the west village. 5 years ago when I moved there it was mostly single people, now you trip over strollers, baby stores and pet stores are popping up all over, and the tiny little restaurants with 5 chairs have long been replaced with high end places.

    By the way I don’t think any of this is negative, just changing.

    If that is true, it could help explain some of the immunity to price declines (along with all the usual suspects). Before I go digging up demographic data, thought you might have a view.

    Thanks again for all the good info