For financial analysts seeking an audience there is an almost sure formula: Forecast that the housing market is going to be reduced to rubble.
Anything about housing has a wide audience. More than 60 percent of households own their homes, and many renters would like to own.Homeowners have big investments. They worry about their money, and they are alert to anything said or done that might affect it. That includes forecasts, and helps explain why forecasts of housing debacles never cease.
Several years ago, in fact, a book was written about the coming collapse of housing prices. The event was never recorded by any economic statistic or seismograph, but it didn't deter the forecaster.
Similar warnings have been issued throughout 1989 and the surest bet you can make is that the outpouring of doom, much of it from financial people who tend to measure housing as an investment only, will continue in 1990.
At the moment, there exists a popular notion that single-family home sales and prices have declined sharply in much of the country, especially in the Northeast. Specific collapses, always available, are used to illustrate.
The specifics, however, don't always make a generalization.
National data show that the median price of existing single-family homes in October 1988 was $88,900. One year later, in October of this year, it was $92,100. That's a gain of 3.6 percent.
Data for the Northeast, compiled by the National Association of Realtors, shows the price of typical new single-family homes in October 1988 was $144,400, and in October 1989 $143,300. That's a decline of 0.8 percent, hardly a disaster and one barely worth mentioning in the stock market.
At that, the significance might be overdone. Oddly, that decline in the price of new houses, tiny as it is, might indicate strength rather than weakness. To wit:
Falling interest rates in 1989 encouraged buyers who earlier had been priced out of the market. Clearly, these people wouldn't seek the most expensive homes; they would buy in the middle ranges, creating a lower median.
In spite of warnings and forecasts, home prices have been remarkably stable or strong year after year. Industrial and commercial real estate might not have done well, but single-family housing is distinct from them.
What has changed is the fortunes of banks that made bad loans, and in this way a banking problem becomes a so-called crisis in real estate.
Since 1972, Census Bureau figures show not one year in which prices of new and existing homes have failed to rise nationally, although there have indeed been been regional or local declines.
But, while bad news in one stock, unless it is IBM or General Motors, rarely is used to suggest a general market decline, that reasoning isn't always applied to housing.
Housing is, in fact, an even better investment than shown on some popular Wall Street charts of relative values. Most charts of comparative investments relate the percentage gains in housing to the total price. However, most Americans put down but a fraction of the price when buying homes. They take loans instead.
When ordinary folks buy stock they usually pay full price rather than go on margin, or borrow from the broker. To borrow may be unwise because of volatility. So, if a $10 stock rises $1 they usually have a 10 percent gain.
When a $50,000 house, bought with $5,000 down, rises in value to $55,000 the apparent gain is also 10 percent. But, since it was purchased with only $5,000 down the real return to the homeowner is 100 percent.
The homeowner pays interest on the mortgage, and real estate taxes, insurance and upkeep, but he or she also receives big income tax deductions not available to shareowners, and gets to sleep in the home-investment.
Remember it the next time financial "experts" proclaim the end of the world in housing. And remember, some of these are the same ones who created a brokerage house recession and billions in bad loans for banks.