The Past is Not Prologue in Housing Markets

Posted To: MND NewsWire

Can the past be reliably expected to predict the future? Probably not if one is talking about consumer behavior and structural breaks in the housing cycle. That, at least, is the opinion of Wells Fargo Economists John E. Silvia, Azhar Iqbal, and Abigail Kinnaman in a two-part series in the company's Consumer and Retail Commentary newsletter. They say that, since private consumption is such an important driver of GDP, it is key for policy and decision makers to understand the behavior of consumers and their household balance sheets as they attempt to forecast consumer trends. Prior trends and historical averages should not be used for this purpose. Their analysis shows that household assets and liabilities are non-stationary and non-means reverting, that is their averages do not stay the same...(read more)

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