The Almost Daily 2¢ - Desperate Times Call For Desperate Measures

At first glance, the recent article concerning the “inside story” on the various home price indices penned by the National Association of Realtors (NAR) Chief Economist Lawrence Yun had me a steaming, especially with respect to its spurious attacks against Professor Robert Shiller.

But after reading a bit closer, I began to get a sense of both the truly desperate and unhealthy circumstances these used-house salesman have created for themselves (and America) as well as the lengths they will go to as they devolve further and further into madness.

I suppose that you could almost feel bad for this dwindling outfit of dimwitted losers had it not been for the obvious absurdity of the bed they made over the last decade and the faux riches it brought them.

It’s all come crashing down now and given that their former “rockstar” cheerleading economist shill David Lereah has left the building, economist Yun, a much more obvious and less enticing shill, is left holding the bag.

But a bag is still a bag and, however foolish, the tricks Yun’s is filled with are still meant to deceive.

First, let’s get one thing straight… Realtors deal in median home prices.

The method of determining the median home price, simply ordering the collection of current home sale prices and then selecting the price directly from the middle, is neither ideal nor democratic (as the ridiculous idiot Yun proudly declares) nor anti-democratic for that matter.

Determining the median price, like economist Yun himself, is one thing and one thing only… simple.
In fact, it’s so simple that it’s a poor indicator most of the time… perhaps that’s even why NAR relies on it so heavily.

Next, although both the OFHEO and S&P/Case-Shiller home price indices are far superior and more accurate at gauging actual home price changes than the brain-dead Realtor median price method, the OFHEO indices are formulated exclusively from data gathered from the GSEs (Fannie and Freddie) transactions thus they exclude any home sale transactions with financing in excess of the GSE conforming loan limit (currently $417,000) as well as being tainted further by the inclusion of re-finance data.

Don’t get me wrong… I think the OFHEO data is plenty accurate (I host both the complete OFHEO data and S&P/Case-Shiller… click for interactive charting) but as we are all keenly aware, non-agency transactions had a lot to do with the tumult we are seeing in the housing markets today, and the S&P/Case-Shiller indices, formulated directly from deed transactions, captures that.

On Yun’s issue of the distribution of S&P/Case-Shiller indices… so what if three cover metros in California and two cover metros in Florida, the other fifteen cover areas like Denver, Boston, Washington DC, New York, Seattle, Atlanta, Chicago, Detroit, Minneapolis, Charlotte NC, Portland OR, Dallas, Las Vegas, Cleveland and Phoenix.

Next, on the topic of context…. I CANNOT IMAGINE a more ridiculous notion than a NAR economist complaining about things being put out of context….

NAR is the CHAMPION of out of context analysis with shill “professionals” like Yun making false claims and insanely optimistic predictions only to be proven wrong so many times that it’s impossible to keep track.

If you had followed Yun’s own advice to “buy now” last year as prices were “beginning to stabilize” you would have been more than poorly served… you would have lost your shirt on likely the largest leveraged transaction of your life and would Lawrence Yun care? NO... HE THE NAR WANT YOUR MONEY!

More precisely… for his job of sitting around determining the best method of fooling you, the hapless American homebuyer, into buying (or selling) a home, Yun is paid a salary which is directly derived from Realtor dues that are, in turn, directly derived from the commissions from the home sales.

Next, Yun attempts to level a series of egregious blows against Professor Robert Shiller that amount to simply another attempt to smear the name of a public figure that actually has some REAL credibility.

Although it is true that Shiller’s research firm, MacroMarkets gets paid for the use of the Case-Shiller indices during futures contract transactions at the Chicago Mercantile Exchange (CME), Yun’s suggestion that this represents an conflict that gives Shiller an interest in the housing market decline only demonstrates how truly underhanded, ugly and ignorant Yun is.

Traders at the CME can choose to take either the long or short end of the trade through futures contracts as well as call and put options… ALL transactions presumably result in royalties to MacrMarkets not merely the short transactions.

If Shiller is guilty of something, it’s championing the optimistic notion of housing futures trading eventually bringing more stability to the housing markets by the creation of what is essentially “home equity insurance” derived from futures activity.

His concept may be far off, but if the trading activity gets liquid enough, third parties may step in and offer products derived from futures trading that we may all benefit from.

Finally, Ill remind readers that Professor Shiller is by far the least emphatic of recent “bearish” economists … I hesitate to even call him a “bearish” economist as he is only popularly known that way and is likely more accurately described simply as a skeptic.

Watch any of the Shiller clips I host at BNN and you will see that he is academic, reserved, and not the least bit aggressive with his position or outlook always leaving the door open for unforeseen market changes.

Recall that Shiller was the first to notice and report to the media that the Boston housing market showed a little extra price strength last year before it inevitably fizzled under the weight of the credit turmoil.

Also, of today’s most prominent economists, I think it would be fair to suggest that Shiller has been the most vocal at calling on the government to use intervention to stem the decline in the housing markets, urging significant rate cuts and challenging the federal government to get more creative with its approach.

So why is it that the NAR and Lawrence Yun attack Robert Shiller so?

Aside from being complete imbeciles, they are evil and desperately NEED to create a sense of doubt in the minds of anyone who might have noticed the accuracy of Shiller’s outlook and housing price indices.

They hope by doing this they can create a false dialog in the media that may soon lead to a dismissal of Shiller’s work and credibility.

Unfortunately for them (and the many home buyers they duped) though, after two years of substantial weakness, we have just entered the price “free-fall” phase of the housing decline with radical downward price movement being plainly visible no matter what measure you use.

The NAR will very soon be completely powerless in any attempt to control the outlook for home prices and the housing market... and not a moment too soon!