Green shoots, remember?

Former Federal Reserve Chair Benjamin Bernanke didn't invent the term. However, he used it to describe an economy that had ground down to the end of getting worse. He figured it'd reached the point where it could only get better. A few barely detectable, fragile sprouts of lending and behavioral economic life signalled a new cycle might then take root.

That same Spring of 2009, I'd invited Yale University economics and housing professor Robert Shiller to keynote a two-and-a-half-day leadership summit for homebuilding strategists in Chicago.

[Between you and me, I made the mistake of signing off on a conference agenda that scheduled Dr. Shiller – who'd go on to recognition as a Nobel Prize winning economist in 2013 – in the "bookend" session at the end of the conference program. A celebrated speaker, we thought, would hold attendance on the final getaway day... Check the bottom of the story for whether the tactic worked to hold our audience on the last of three days.]

Dr. Shiller, that Spring, presented the data that led him to conclude – well before most others – that housing was bound to come crashing down starting in 2005. What would come next, especially as regards the housing price measurement tool he and colleague Karl Case developed, capturing repeated home sales price indices, Robert Shiller admitted to his audience of homebuilding executives, he didn't know.

A striking fact about the big [financial, credit, employment, housing] mess we're in is that no one knows what to do. It's all done on gut feeling.”

He did give a nod to Dr. Bernanke and his theory of green shoots, which Bernanke observed came in the form of signs that banks might be willing to lend more freely than they had, which was hardly at all. Dr. Shiller noted that, for himself, a measure he thought it worth keeping an eye on was the University of Michigan index of consumer sentiment, because it would reflect whether or not households were feeling less insecure than they had been about the future. I wrote afterwards:

People are saying, ‘we've gotten over the scare,'” Shiller said. “It's got me wondering whether this point could be the real turning point in the economy.”

After the prepared remarks, a homebuilding executive in the room stood and asked the future Nobel Laureate Robert Shiller to say, based on all the data he pays attention to, would people start buying new homes again in Spring 2010, or no?

The response was one to remember forever.

It was a full-body shrug.

It depends," Shiller replied, in the shape of the shrug. "I don't know," he said, still in the shape of the shrug. He finally shook it off, adding, "And if anybody tells you they know the answer to that, they're lying."

That year, after homebuilding executives returned to their workplaces, they met with mostly a numbing silence on the demand front, continuing a business stretch that would send many more of them into the throes of financial distress. Only then did it become clear that the damage to consumer household sentiment and behavior proved to have a long tail. The mere fact that things were not getting much worse didn't reignite momentum, at least until 10% unemployment rates started to come down sustainably.

In Spring 2023, a series of steady, sequential weeks and months of positives on the homebuying front have buoyed confidence among homebuilding strategists that the worst of housing's correction has passed. They sense that budding demand momentum has staying power – strong jobs, strong demographics, and real scarcity of new and existing homes – to spare.

And one of the big differences between now and 2010 is that the recent descent from peak has only plummeted to a level most operators would consider to be a pretty good business year – all things being equal. They'll take it if this, or even a bit dicier, is as rough as it's going to get.

Still, that Nobel economist's shrug, "It depends," comes flashing back. Animal Spirits are hard to read, but they're easy to believe you've read them correctly. This Collaborative Fund essay Morgan Housel published last week struck me as perfectly timed, as always. He concludes:

Most fields [like residential construction and real estate] have lots of rules, theories, ideas, and hunches. But laws – things that are unimpeachable and cannot ever change – are extremely rare. Some fields only have a handful. A big problem arises when you try to force rules and theories to become laws. The few laws tend to be the most important things in any field. But everything else, like Einstein said, is just a theory of maybes."

We're living, working, doing business in a time of "it depends" and "maybes." Thrive with those conditions, and you're going to do fine.

[The answer: We scheduled a future Nobel Laureate, Robert Shiller, in the last spot of a Summit agenda involving 250 top strategic executives from national, regional, and local business enterprises. About 70 were in the room to hear him, which turned out to be a disservice to Dr. Shiller's expertise and the value he offered. Lesson learned.]