Since we have seen Marian Finnegan and Marie Hunt out in force lately I wanted to get an insiders view of something.
You appear to work with one of the large EA firms in Ireland and hence have a head of research, or chief economist or a beast of that ilk on the payroll. My question to you would be, without revealing who you might work for, what is the general opinion among the “front office” staff of the material that get disseminated and the quotes that appear in the media from people like Marie Hunt and Marian Finnegan?
I fully understand if you don’t feel able to answer.
Simple - a collective ‘‘WTF ?’’
Honestly, we are in disbelief with what we read.
The predictions coming out of most economists seem to be built on historical data or another economists analysis.
Neither of these accurately reflect todays market, hence their conclusions appear way off the mark.
However, its also important to understand that an economist has to back up their analysis with data. If I tell an economist that their figures are totally out of whack with todays market, its irrelivent to them - because todays data is not yet available. Data always comes out about 9 - 18 months after the event.
This is NOT some sort of conspiracy.
If I have a house for sale for €1m and it sells for €1m, then these figues show up on ESRI data.
However, if the next house in the same estate is put up for sale at €1m and the market has fallen back c20% thus valuing it at €800k, then it remains unsold and OUT of any data.
Some analysists use ASKING PRICE to determine movements in house prices. Yet this is irrelevant in the above example.
The market fell 20%, yet it shows no fall in any asking price data or sale data.
The points you make there draw out my fundamental criticisim I have of economists people most typically come across (i.e. those in the media). They don’t actually act like real economists.
Real economics is a type of excercise in diagnostics, prognosis and presciption. Use a range of indicators to map onto a model (i.e. a description) that you believe best represents how the workd behaves in order to intrepret what excatly is going on and hence where things might move and hence what may or may not be recommended actions.
Most of the Comicals and the Dans (Hunts and iInnegans) don’t appear to do this. They just appear to extropolate. Prices are rising, so prices will rise (but not so fast). The population is growing so the population wil grow (but not so fast). Remember the clowns who claimed that the recent rate of rapid population growth in Ireland was something that could be relied upon to underpin housing demand. But that was in fact a symptom of the bubble, not a cause of it.
An analogy is with a good doctor and a bad doctor. A good doctor looks at a range of symptoms, makes the best guess at what would cause that range of effects and then precribes a treatment. A poor doctor would just look at trends - you don’t seem to be getting any worse, so it isn’t anything to worry about.
So I would be highly critical of the Finnegans and Hunts, because although a time lag in information does make things more difficult, it does not make it impossible to interpret a wider range of factors. We might not yet have hard data aobut the extent of falling property prices, but a proper consideration and interpretation of data like the money supply, credit conditions, rental yields, household financial deficits etc. all build up to point to one thing. It is worse than it appears; expect more, larger price reductions.
a) if it was mortgaged by PTSB and
b) only at the value the bank placed on the property (which is not necessarily the mortgage value) and
c) then, only if the bank chooses to include it in the sample data supplied to the ESRI.
The ESRI methodology for processing the figures into an index may be sound (although options are divided) however the PTSB provision of sample data is arbitrary.