RealtyTrac: Several economists missed the mark with 2011 projections
Every new year brings predictions on how the economy is expected to fare, especially in terms of home sales, prices and gross domestic product growth. But with 2012 still in its infancy, RealtyTrac took a different approach this week by revisiting economists who released positive forecasts in January 2011. In hindsight, the economists told the real estate data firm they were correct in stating the nation would avoid a double-dip recession in 2011. But they failed when making forecasts on housing and were off when projecting a home-price bottom, larger increases in GDP and improving consumer confidence. "As housing goes, it shaped up pretty much as we expected. Prices are a little softer than expected. I thought price declines would stop at end of the year (2010), but they haven't," said Christopher Thornberg with Principal Beacon Economics. "We said no second recession. No double dip. We're being proven dead right on that call." Thornberg said revisions made to GDP by the Bureau of Economic Analysis threw him off. "The revisions to the economy that came out in July surprised me and a lot of folks. It's hard to get ahead of the Bureau of Economic Analysis when they change history on you," he said. "It didn't change the overall size of the recovery, but it made 2010 better and 2011 worse with the (second-quarter) GDP numbers. Not being privy to BEA methodology, it's hard to see what's coming down the pike." Mark Zandi, chief economist with Moody's Analytics, also said his 2011 home price forecast was off. "The housing market didn't exactly hit bottom in 2011 as I had expected," Zandi said. "Home sales and housing construction have likely hit bottom, but house prices will likely decline a bit more in 2012. All in all, housing and the economy were a bit weaker this year than I had hoped for." The economists surveyed claim political wrangling over the economy in 2011 caused a dive in consumer confidence, stalling the recovery even more. In the end, 2011 was a flat year, said Jay Butler, professor emeritus with the W.P. Carey School of Business at Arizona State University. "I was a little more optimistic than it turned out to be. It was pretty much a flat year," Butler said. "People moved their expectations out even further to 2014-2015 until things get much better." He also said property is going up in some places and foreclosure prices edged higher. "The motivation is the deal," according to the professor. "Everybody is looking for inexpensive homes. Investors are still dominating the market. The problem is there's no real clear trends. It's like the stock market." The economists expect distressed properties to remain a large part of the housing inventory. "I expect the share to rise from closer to one-third (of all inventory ) in 2011 to as high as 40% early next year," Zandi said. "The number of first mortgage loans in the foreclosure pipeline remains very high, but is down a bit from where it was a year ago." He added, "Once the state AG suit is settled, this inventory should begin to decline in earnest. It is very encouraging that early state delinquency (less than 60 days) is low and falling quickly." Write to Kerri Panchuk.