Why is Anyone Surprised (Housing Edition

The New York Times gave a succinct summary of conventional wisdom on yesterday’s stock market drop:

Countrywide’s stark assessment signaled a critical change in the substance and tenor of how housing executives are publicly describing the market. Just a couple of months ago, some executives were predicting a relatively quick recovery and saying that most home loans would be fine with the exception of those made to borrowers with weak credit who stretched too far financially.

Executives at Countrywide had for some time been more skeptical than others but the bluntness of their comments yesterday surprised many on Wall Street. In a conference call with analysts that lasted three hours, Countrywide’s chairman and chief executive, Angelo R. Mozilo, said home prices were falling “almost like never before, with the exception of the Great Depression.”

Why is anyone surprised? Over two weeks ago, S&P forecast that home prices will decline an average of 8% from peak to trough in this housing correction. That’s a massive decline. Yet just about no one in the mainstream media picked up on S&Ps remarks. If S&P could see that the outlook was grim, the underlying information was in plain view.

And anyone with an operating brain cell should recognize that housing industry executives would be the last, not first, to be candid.

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