Brian Riedl of the Manhattan Institute writes about why economic forecasters should be humble:
The classic phrase “often wrong, never in doubt” is only a slight exaggeration to describe the fields of economic forecasting and, more broadly, economic commentary.
History is filled with examples of confident, consensus economic predictions that were shredded by subsequent events. In 1929, legendary Yale economist Irving Fisher confidently told the New York Times that “stock prices have reached what looks like a permanently high plateau” — right before the crash that precipitated the Great Depression. Even after the crash, the president of the Equitable Trust Company declared, “I have no fear of another comparable decline.”
Douglas Carr looks at the data and argues we should keep an eye on the housing market:
In the last few months, even with recent mortgage-rate declines, year-over-year increases in mortgage payments for average new homes have risen at the fastest ever rate, with only the early 1980s severe recession as a point of comparison. Home sales peaked even before mortgage-rate increases, and, judging from the last crisis, prices soon will follow. House prices are over 20 percent above historical norms relative to incomes, and corrections generally bottom well below average, which would wipe out equity for the most recent generation of home buyers. Whatever happens with prices, home building already is plummeting. The National Association of Home Builders CEO states, “We’re heading into a housing recession.” In the first read of second-quarter 2022 GDP, the housing downturn accounts for virtually all the quarterly decline, and it’s just getting started. On top of China’s even larger housing slide, inflation may be in for a large negative shock.