Back to the Future

As we contemplate the pending revival of the housing market, it is interesting to go back in time and review what the so-called experts were saying about the upcoming economic slowdown and the ever expanding housing bubble. While most prognosticators predicted that we would see a gradual slowdown in the housing market and a subsequent slowdown in the overall economy, very few accurately predicted the depths to which we would fall. We did find one group that accurately (almost eerily) predicted the predicament that are currently in. The economy tracking and predicting website iTulip.com published an article on January 20, 2005 with the following statement "Housing bubbles don't collapse suddenly. They go through a long series of self-reinforcing deflationary stages that typically last five to seven years. Given the extreme and unprecedented nature of the current housing bubble, I expect a 10 to 15 year downturn to follow this boom. The government will step in with all manner of supports and bailouts along the way, similar to those that created the bubble in the first place, so the exact trajectory of the decline is impossible to predict." While we don't believe the iTulip.com prediction of a 10 to 15 year recovery, their foresight was right on.

Further, the article (remember, this is from January 2005) went on to state "As transaction volumes continue to fall, demand for housing-related employment will decline too. The first signs of labor market distress will start to show up, as more and more of that 43% of the private sector who found jobs in the housing industry are no longer needed. Coincidentally, major employers - such as the U.S. auto industry - will be going through major restructuring, adding pressures on housing prices in some areas." This is pretty heady stuff considering it was written three to four years before the ultimate collapse of the auto industry. The iTulip.com article is basically a step-by-step account of what was about to happen to the housing market and overall economy.

As we mentioned previously, we think that the housing industry is in the early stages of recovery and don't buy the 10 to 15 year recovery time that iTulip is predicting, but it is interesting to go back to the future and review some accurate fortune tellers. You can review the entire iTuplip.com article from January 20, 2005 here.