July 16, 2004

News & Opinion: Beating the Business Cycle - Our Record

By: Dylan Schleicher @ 4:23 PM – Filed under: Current Events & Public Affairs

Our record of forecasting cyclical turns is pretty good. But I must say its not because we are particularly smart. Rather, its because we have quite a bit of faith in the fundamental theory behind our leading indexes, and therefore we dont try to second guess them. Housing prices are a good example. Typically, when the economy turns down, home prices follow. 2001 was the first global recession in a generation so surely home prices should fall, right? Well, I sure thought so until I took a close look at what our Leading Home Price Index (LHPI) was doing. In past recessions it had turned down signaling the aforementioned declines in prices. But this time it kept growing. We checked our skepticism and forecast a continued rise in home prices in spite of the recession. In early 2003, when people were calling for the home price bubble to burst, the LHPI started continued rising strongly, and our outlook reflected this. Currently the pace of increase in the LHPI has eased, but it is not falling. So, while there almost certainly is a decline in home prices somewhere in the future, it is not imminent.

About Dylan Schleicher

Dylan Schleicher has been a part of the 800-CEO-READ claque since 2003. Even though he's stayed on at the company, he has not stayed put. After beginning in shipping & receiving, he joined customer service and accounting before moving into his current, highly elliptical orbit of duties overseeing the ChangeThis and In the Books websites, the company's annual review of books and in-house design. He lives with his wife and two children in the Washington Heights neighborhood on Milwaukee's West Side.