Paper Economy - A US Real Estate Bubble Blog

Sunday, August 27, 2006

The End of the Myth

Remember when they attempted to blame the Space Shuttle Columbia disaster on a single convoluted PowerPoint slide?

Never in the history of software engineering has there been such a controversial office productivity application.

Whether it’s being criticized by noted Yale Professor Edward Tuft for being analytically inept, blamed by the media for creating a shuttle disaster or embraced by David Byrne as a new medium for artistic expression, Microsoft PowerPoint never seems to be at a lose for contentious circumstances.

Possibly though, it’s the author, and how he chooses to “present” his information that should be the real focus of any criticism.

Looking back at the PowerPoint presentation given by David Lereah, Chief Economist for the National Association of Realtors, at last years “Leadership Summit”, it seems plainly obvious that it was an attempt to “spin” the circumstances of the nations real estate market to benefit inherent interests.

Entitled “The Real Story about Today’s Real Estate Boom”, the presentation both chronicles the nation’s meteoric housing boom as well as attempts to justify the legitimacy of its ascent.

It seems, at that time, the goal was to convince people of the inherent fundamentals driving the housing boom thus allaying any fears that there could ever be a painful pullback.

Slides dedicated to “Boomer” demographics, job creation, immigration, regional population growth, and building restrictions all seem to neatly explain why the boom was really just an expression of underlying factors that were not expected to change measurably.

There was even a slide denigrating various “chicken little’s”, as it termed them, for having questioned the soundness of the recent run-up.

The presentation concluded by declaring that there was NO coming danger of foreclosure in cities like Boston, San Diego, San Francisco, and Las Vegas, as well as making some pretty optimistic predictions about home sales for the coming 2006.

As all of us “Chicken Little’s” knew then (and are still committed to reporting now), the wheels were coming off the cart. The boom was a boom, plain and simple. Speculative in nature, founded on false hyper-optimistic herd-think, popularized by media and television, and supported by questionable national organizations and individuals with latent interests.

As was reported here last week, David Lereah’s “Leadership Summit” PowerPoint presentation this year spun quite a different story.

Whether the latest presentation was an attempt to backpedal in order to save face, or simply another in a series of shifting positions intended to exploit the market regardless of the direction its trending, one may never know.

What’s important though is that now the housing bubble is “officially” no longer a myth.

Not because a simple PowerPoint proved it, but because the presentation, representing the key facts distilled down to the very essence of the matter, even with an inherent slant, can no longer disguise what should have been so plainly obvious all along.

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5 Comments:

  • Keith over at Housing Panic must have read the post where I pointed them to your blog. Unfortunately he blew it when he gave you kudos. His link was wrong.

    You da man for finding the NAR presentation!

    By Anonymous Anonymous, at 3:39 PM  

  • Good work on finding the PPT presenation! And thanks for the great blog!

    By Blogger Oahugh, at 1:37 AM  

  • Not a lot of attention paid to the early warning signs associated with a weakening housing market - as an example, in non-judicial foreclosure states (about 23 of them in the US), the reinstatement times - the time from the notice of default until the homeowner brings the loan current has dramatically lengthened - going from about 45 in CA in 2005 to approaching 90 days in mid-2006; not to mention that the number of foreclosures started are going to sale - less than 10% in 2005, already approaching 25% in June 2006, and likely going to 50% or more in the next 12 months. Adding distressed inventory to the CA real estate market will exacerbate the growing 'time-on-market' statistics.

    Historically, the average number of quarterly NOD's filed in CA have been between 27-35,000 per quarter, with only 20,000 in the most recent quarter, so this part of the market place hasn't seen the pain.

    Looking back to several of the historical market down turns, the 80's were driven by the 'oil state debacle' - CO, LA, TX, OK states, with some 'swiss cheese' events due to aerospace industry collapes (e.g., Seattle, So.Cal., and KS). In the future - and in this cycle - we'll likely see the drivers emerge from corners of the economy that we haven't seen in the past - most notably would be the persistence of an inverted yield curve - in the past, this interest rate evironment hasn't a huge burden on the consumer - mostly businesses - but I presume that this time the inverted yield curve will be the stone around the consumer's neck - especially with 1.0 to 1.5 Trillion of ARM's resetting in the next 12-18 months.

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