The great debate in economic circles these days is whether there’s a turnaround going on in the American housing market. To help determine whether this is occurring, computers used to defeat a Russian chess master in a mere 32 moves have been employed, along with mathematical models that are rumored to have been salvaged from a UFO that went down in Roswell, N.M. in 1947.
Yes, this is a tough one to figure, alright. Great brain power and the highest order of economist training is being applied to the matter. Except by people like myself, whose primary tools to make this determination are the nub of a pencil and the back of a #10 envelope.
Here’s what I do. I take the number of foreclosures announced for the month, and I take the number of new and existing homes that were sold that same month. Then I subtract the smaller number from the larger number. This tells me whether more people ended up owning a home that month, or more people ended up losing a home that month — which is the only true, real world measure of whether a housing market is recovering. And clearly, of late, it ain’t.
One problem with this approach, however. And it’s a big one. You can’t make any money selling this methodology because it can be duplicated by a sixth grader. There’s that other problem, too. It’s based on common sense, not market metrics. Otherwise, well…