2009: The year of the economist

Industry uncertainty and market pressures conspired to make economists the rock stars of the recovery in 2009, and they spoke frequently to large rooms of rapt, anxious audiences.

Most of the time, though, the audience left the room wondering whether what they just heard was good news or bad news.

Ladies and gentlemen, we journalists can be equally unclear for a fraction of the cost. Let us speak at your next event. Plus, we can borrow liberally from their presentations—that’s one of the things we learned in journalism school.

But before you book us, here is an outline:

I. The principle of “people gotta live somewhere.”

Professional economists refer to this theory as “underlying demand for housing” or “baseline demand,” and they represent it on their PowerPoints with a steadily rising line across the grid. Who knows what it really is: 1.7 million, 1.8 million. But the point is, the people’s natural demand for places to live is way above new residential construction, which is stuck under 600,000.

Economists love to point to this “pent-up demand.” Of course, there is no immutable law saying people have to live in housing developments in the suburbs. But they gotta live somewhere.

II. The theory of surplus optimism

In this world of foreclosures, unemployment and uncertainty, it’s difficult to predict housing starts, that bellwether of industry and market health. And since we’ve been keeping track, most predictions have erred on the side of optimism.

Let’s look at the forecast, from the National Association of Home Builders. Back in January, the group’s economists predicted 649,000 total housing starts for 2009. Based on what we know today, that forecast carries a 13.1% optimism surplus.

The NAHB economists predicted 716,000 starts in 2010. Remove a 13.1% optimism surplus, and you get 622,000.

The NAHB predicted more than 1 million starts in 2011. Removing surplus optimism, that’s still a respectable 920,000.

III. Things aren’t that bad

Many homes today are worth way more than they were worth in 2000. Meanwhile, the U.S. net household wealth of America in 2007 is comparable with 2004. It’s important to mention that. Let the record also show that things looked bleak in 1981-1982. (This editor’s hometown of Anders on, Ind., briefly led the nation in unemployment with a rate in excess of 20%.) They also looked bleak in 1973-1974.

If you believe in our system’s cyclical boom-bust nature—and our economists have taught us to believe in booms after busts—then you believe that good times can’t be too far off.

IV. Things aren’t that good.

Ladies and gentlemen, no presentation is worth its salt without some element of warning against an uncertain future. The impact of unemployment and foreclosure is a toxic mix. And the government is attempting some historic, high-risk resuscitation of troubled assets. Here, we will again borrow from the pros.

We can’t give away the whole presentation—there’d be no incentive to book us. But we are giving away our best effort at quickly capturing the current reality. Our Industry Dashboard of important and widely watched economic data is on page 42. It will be updated regularly at HCN.com . Check it out, and let us know what you think.