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MONEY

The wisdom of Mr. Smith

Mike Cronin
mcronin@citizen-times.com

ASHEVILLE – Alternative versions of an oft-repeated quote about forecasting have rounded the globe for generations.

It goes something like this: "Prediction is very difficult, especially about the future."

The quote's provenance has been disputed. Among those said to have said it are Danish physicist Niels Bohr, Danish artist and writer Robert Storm Petersen, New York Yankees Hall of Fame baseball player Yogi Berra and Hollywood producer Samuel Goldwyn.

No matter who first uttered the words, however, one nationally known Asheville economist seems to have quite a handle on soothsaying — at least in terms of U.S. housing prices.

Since 2010, James Smith, chief economist for Asheville-based Parsec Financial Inc., has surpassed a panel of more than 100 housing-market experts in his ability to forecast what home prices are going to do within various time horizons.

Parsec Financial is a wealth-management advising company.

Terry Loebs, who founded and manages the Massachusetts-based economics consulting firm Pulsenomics LLC, assembled those experts five years ago to weigh in once a quarter regarding where home prices are heading in the future.

Smith has amassed five, first-place awards and four other top-10 finishes for his predictions during that span. That resume includes two crystal ball awards — a recognition for excellent performance in a given year.

That economic-forecasting box score is more impressive than any other participant in the panel.

"It's remarkable that Jim's been able to do this during a period when the housing market is as unpredictable as it's ever been," Loebs said.

"And, he's doing it within the context of highly qualified, diverse, very reputable and well-known individuals who really know what they're doing," he said.

That makes Smith feel "pretty awesome," he said, speaking from Chicago during a phone interview on Monday.

"I'm very proud, obviously."

Smith and a group of economic forecasters were meeting at the Federal Reserve Bank of Chicago.

The panel includes macroeconomists, investment strategists and housing-market analysts.

Due to the Great Recession, "the housing market was in pretty unsettled shape," Loebs said.

"There was a natural appetite at that time for getting a wide variety of opinion on where home values were heading in the future," he said.

Loebs invited Zillow, a Seattle-based real-estate company, to sponsor a home-price expectations survey a couple years ago and recognize those forecasters who performed well.

"I wanted to make it interesting and fun and to recognize panelists who had noteworthy performances," Loebs said.

Smith attributed his success to his being more optimistic than his colleagues.

"From 1933 to 2006, home prices never went down on a national basis," he said.

Regions of the country would experience booms and busts, but until 2006, a national decline had never occurred.

"So buying a home as investment as well as a place to live made enormous sense — it was more than just conventional wisdom; it was fact for more than 70 years," Smith said.

He said he's been able to do so well because Smith figured the dip in house prices had to end soon, so he decided to be less negative in his forecasts.

Smith also is an elected Fellow of the National Association for Business Economics and served as its president in 1989-90. Smith has served as a senior economist at the Board of Governors of the Federal Reserve System and as a consultant to the U.S. Council of Economic Advisers. He is a member of the European Council of Economists and has been an adjunct professor at Kenan-Flagler Business School at UNC Chapel Hill since 1988.