The press is abuzz this morning about a new report saying sales of single family homes rose in December. The rise in sales at the end of the year reverses a pretty significant slide that happened over the eleven (maybe more) months prior. Because the number of home sales is a leading indicator of economic progress in the nation, analysts suggest the report is a sign that the economy is on the way towards recovery.
Not so fast.
According to at least one news report I heard this morning, the data indicates that buyers are securing foreclosed properties at a steep discount. In other words, savvy (or shrewd) investors are buying up properties at rock bottom prices on the hope that if/when the economy does recover, they'll make a killing in the housing market. After all, home sales will always be a part of our economy - the issue is when will people be buying again, and what will they be willing to pay (or able to afford).
Among the things I am not an expert in, housing policy is near the top of the list — but it seems to me like a pretty weak indicator to me if people who are scooping up foreclosed properties are considered the great hope for our economy. Moreover, the logic that at least one housing analyst offered on the news this morning — that if sales remain brisk, prices will follow — seems pretty flimsy.
When I was a child, I would often go and buy a new video game, set of baseball cards, or similar item without the full permission of my mother. Even when I knew she didn't want me to spend her money on such an item, I would permission and try to find something, anything, that would indicate I had received it. For example, my mother might say "I am not going to spend $80 on a video game" — so I would only spend $60. Or, "Do you really need to buy all those baseball cards" — to which of course, in my youthful mind, the answer was always yes. I wasn't a bad kid. I didn't directly disobey my mother. But, as she used to say to me, I would only "hear what [you] want to hear."
The conversation around the housing data seems to fall squarely into this category. I fear that housing analysts, economists, the media — and eventually all of us — will become so desperate for good news on the economy that we will simply hear what we want to hear.
Home sales are up? That's great news! No, it doesn't matter that the foreclosure rate is up 81% in the last year, and in some communities as many as a quarter of residents are being evicted from their homes. Someone is buying! Everyone can feel safe buying now!
It actually seems a little bit like how we got into this mess — with loans being given to people who had no way of paying them back, and such. You see, in our haste to feel better about the economy, we will make bad choices about where to invest and how much to spend. This will seem ok in the short term, but we are certain to find ourselves in a mess down the line.
There are serious issues with the economy. We need to rethink how we do just about everything. And while there is a need to put people back to work, and keep things like home sales from slowing even further, this will take time. If we can be patient, the economy will recover — or grow stronger as a result of new and different approaches that are now being explored — and we will all be better for it. If we do the opposite, and try to sneak a semi-positive report past everyone as a sign of strength, things will only get worse.
Listen carefully people.