Tuesday, May 19, 2009

Housing Starts Fall Again

Martin Crutsinger of AP reports:
A modest rebound in single-family home construction in April raised hopes Tuesday that the three-year slide in housing could be bottoming. But with the supply of unsold homes bulging, foreclosures rising and prices falling, no broad recovery is expected until next spring at the earliest.
You know, it's funny: we saw articles yesterday (Bloomberg) reporting that Q1 housing starts would rise, and this would provide further evidence the recession has bottomed out. But today's crop of articles make little mention of recession.

Nor should they. This little episode shows two areas where reporters need to do a better job:
1. Stop giving so much emphasis to predictions, especially in a volatile climate like the current financial crisis and recession.
2. Separate fact (housing starts gained/fell) from analysis (the economy has therefore recovered/bottomed out/worsened).

UPDATE: Lucia Mutikani of Reuters reports (emphasis mine):
New U.S. housing starts and permits dropped to record lows in April, while retail sales fell last week, according to reports on Tuesday that tempered optimism the nation's recession was drawing to a close.
Here's how she led yesterday's article, predicting good housing start news:
U.S. homebuilder sentiment jumped to its highest level in eight months in May, a private survey showed on Monday, supporting views that the three-year housing slump might be close to an end.
So Monday she thinks the recession will end soon, based on a prediction of increased housing starts. The next day, the prediction turns out (somewhat) inaccurate, and...she tempers her optimism.

Check out this graf from today's article, near the middle:
Analysts said that while the decline in starts suggests the recession has yet to run its course, it should help the housing market work through a huge stock of unsold existing homes and lay the foundation for a recovery from a three-year slump.

"This is essentially a good thing. It means supply will eventually come back in line with demand. Home builders have adopted an appropriate risk aversion stance," said Joseph Brusuelas, an economist at Moody's Economy.com in West Chester, Pennsylvania.
Why didn't she report this yesterday? As long as there's a "huge stock of unsold existing homes", who in their right mind thinks housing starts are going to significantly improve?

Also missing from today's or yesterday's article is any acknowledgment of the impending wave of foreclosures due to hit the market this month or next.