NAR Against Tax Reform is Self Interest Over Common Sense

The National Association of Realtors nearly immediately met today's Trump administration tax reform policy announcement with outright rejection suggesting that the proposed changes were placing "home-ownership in the cross-hairs" and further suggested that the proposed tax changes would "nullify" the current tax benefits of owning a home.

It's important to note though that the primary issue that the NAR has taken with the proposal has only to do with how it may change the use of the mortgage interest deduction (and NOT the primary residence exclusion which the administration directly indicated was unaffected) which would only come as a result of the proposed increase in the standard deduction.

Since, under the Trump proposal, individuals and households would have a larger standard deduction (apparently 2x larger!) there would fewer tax filers itemizing their deductions (i.e. they would be taking the standard deduction in lieu of itemizing) and thus fewer caring about the tax "benefit" of taking on a mortgage.

So, while the presumed impact of the loss of this "benefit" has the NAR concerned about their private interest, common sense tells us that this is not a loss in any normal sense and further that taxpayers overall would be better off with a 2x increase in their standard deduction than the perverse incentive of taking on more housing debt.

UPDATE: Apparently the mortgage interest deduction is now NOT changing so NAR need not reject major tax reform only to protect their own self interest.

Too Proud to be a Realtor

For the last year or so the National Association of Realtors (NAR) has been a bit cagier about their blind devotion to home-ownership, the use of their primary political tool of increasing home ownership rates, and their soulless lack of respect for anything other than their own private industry interests but now, with the looming restructuring of the nation's housing finance scheme, they are back at it again.

Let us recount that it was this very organization that spent 2006 and 2007… the two peak years of the housing boom… urging millions of hapless Americans to embrace home-ownership by taking out full page ads in top tier national newspapers and radio and television commercials all pushing messages with themes like “Buy NOW” and “It’s a Great Time to Buy or to Sell”.

Further, recall that during the peak and on into the worst of the housing decline, the NARs own chief economist at the time David Lereah worked tirelessly to spin the conditions of the housing market into the best light continually insisting that the nation’s housing markets were NOT collapsing but simply taking a healthy tepid breather… only deflating slightly.

It’s important to also note that Lereah has since admitted that he was fudging the truth and that he did so because the NAR was his employer earning him a spot in Time magazines lineup of “25 People to Blame for the Financial Crisis”.

Now… why am I drudging all of this up you ask?

The NAR is at it again and this time they appear bent on preventing some of the most important changes to our housing finance system that have been proposed for generations.

The plight of Fannie and Freddie have apparently thrown the NAR into a panic… they are desperate to prevent the loss of sales that would ensue should the Obama administration truly guide our national housing finance scheme away from the failed government-sponsored approach that has been in place since the late 1930s.

The NAR immediately followed the administrations release of the Fannie Freddie proposal with a podcast whereby the current president Ron Phipps cleverly condemns the current Fannie Freddie scheme while simultaneously insinuating that without government sponsored entities there would be no 30-year fixed rate mortgage.

Further, Phipps ridiculously insinuates that holding a pro-housing position is tantamount to patriotism and that supporting the 30-year fixed rate mortgage is essentially a patriotic act.

Finally Phips reframes the NARs position on homeownership pitting the fate of our economy on housing and construction and outlining a plan for a three city bus tour that seeks to “celebrate” homeownership while convincing politicians of Americans devotion to and aspirations for owning a home.

This is precisely the type of nonsense the country needs to seriously distance itself from.

Along with the finance industry, the government sponsored entities (Fannie, Freddie, FHA, etc.), housing speculators and hapless buyers, the NAR was a main agent of destruction that first fueled the housing bubble and then made matters infinitely worse as the collapse ensued by ensnaring millions more into the scheme merely to protect their own private interests.

Now as we move meaningfully closer to a major restructuring the nation’s housing finance scheme, the importance of which cannot be overstated, the NAR shows itself again to be firmly aligned against the best interests of the country.

Citizen Lereah?

Those who have been following along since the early days of the housing debacle will recall the role played by housing bubble blogesphere arch-nemesis and former National Association of Realtors chief economist David Lereah.

Until May of 2007 Lereah vigorously worked to spin the story of housing in such a way as to produce the best and most optimistic outlook possible.

When the housing bubble was inflating, Lereah wrote of the benefits of home ownership, its potential for dramatic wealth creation, and his outlook for a long-trending bull run.

When the markets started to crack, he saw stabilization around every corner, a “boom” that “would not bust”… he routinely massaged metaphors for town hall meetings… “bubbles” bursting became “fat balloons” deflating… and called out non-believers as Chicken Little’s.

Then, as the sub-prime crisis cleared the point of no return, Lereah left the National Association of Realtors for the relative safety of (more or less) obscurity.

For his efforts Lereah garnered the respect (and pay) of his association and a massive cadre of “believer” Realtors but also earned the recent title of one of the “25 People to Blame for the Financial Crisis” by Time magazine and likely the scorn of a generation.

But Lereah has since admitted his mistakes… and although his “positive spin” promotion of the narrow financial interests of an industry group over the overwhelming and truly important interests of the common good was quite a misstep, don’t we all deserve a chance at redemption?

Maybe not… but it appears that Lereah has launched a new venture… let’s call it a blog… with both an ironic title and a decidedly more realistic un-spun outlook.

“Real Estate Economy Watch” is effectively a blog that hosts daily commentary on the housing market, tracks market data, and even specifically follows the course the “housing crisis”.

The title is ironic because it is reminiscent of “David Lereah Watch” a popular blog that relentlessly pounded Lereah during the heyday of the bubble crescendo.

The content, on the other hand, bears an unrecognizable skeptical edge.

Has Lereah turned it all around? Is he “owned up” and now on the road to salvation?

Who knows… but, in any event, his site is worth a read if not simply as a basic contrast against which his past performance and the current NAR line look remarkably stark.

NARcasting The Future: February 2009

This week, the National Association of Realtors (NAR) provided their latest estimate of annual existing home sales for 2009 again revising down their 2009 total year sales forecast to 5.11 million units.

As usual, the latest forecast comes with another dose of truly ridiculous spin.

In an effort to put their absurd bias into perspective I compiled all their existing home sales forecasts for 2007, 2008 and now 2009 into a chart along with a list of prominent quotes supplied with each forecast.

12/11/2006 Prediction: 6.40 million units.
Lereah "Most of the correction in home prices is behind us."

1/10/2007 Prediction: 6.42 million units.
Lereah "The good news is that the steady improvement in sales will support price appreciation moving forward."

2/7/2007 Prediction: 6.44 million units.
Lereah "After reaching what appears to be the bottom in the fourth quarter of 2006, we expect existing-home sales to gradually rise all this year and well into 2008."

3/13/2007 Prediction: 6.42 million units.
Lereah "Although existing-home sales will be marginally reduced due to subprime lending restrictions, they should be gradually rising this year and next."

4/11/2007 Prediction: 6.34 million units.
Lereah "Tighter lending standards will dampen home sales a bit, but by less than a couple of percentage points from initial projections."

4/30/2007 Lereah Leaves NAR for Move.com

5/9/2007 Prediction: 6.29 million units.
Yun "Housing activity this year will be somewhat lower than in earlier forecasts."

6/6/2007 Prediction: 6.18 million units.
Yun "Home sales will probably fluctuate in a narrow range in the short run, but gradually trend upward with improving activity by the end of the year."

7/11/2007 Prediction: 6.11 million units.
Yun "Home prices are expected to recover in 2008 with existing-home sales picking up late this year."

8/8/2007 Prediction: 6.04 million units.
Yun “With the population growing, the demand for homes isn’t going away – it’s just being delayed.”

9/11/2007 Prediction: 5.92 million units.
Yun “Patient buyers in most areas who do their homework will recognize that housing remains a good long-term investment.”

10/10/2007 Prediction: 5.78 million units.
Yun "The speculative excesses have been removed from the market and home sales are returning to fundamentally healthy levels, while prices remain near record highs, reflecting favorable mortgage rates and positive job gains."

11/13/2007 Prediction: 5.5 million units.
Yun "In some ways, the extended real estate boom from 2001 to 2005 created unrealistic expectations that housing is a short-term high-yield investment… 2007 will be the fifth best year for housing on record"

12/10/2007 Prediction: 5.67 million units in 2007, 5.7 million units in 2008.
Yun "The broad trend over the coming year will be a gradual rise in existing-home sales, but because sales are exceptionally low in the final months of 2007, total sales for 2008 will be only modestly higher than 2007."

ACTUAL: 5.652 million existing units sold in 2007

01/08/2008 Prediction: 5.66 million units in 2007, 5.7 million units in 2008.
Yun "A meaningful recovery in existing-home sales could occur as early as this spring, or it may be further delayed toward late 2008."

02/07/2008 Prediction: 5.38 million units full year.
Yun "Where builders have cut construction sharply, and in most areas with improving affordability conditions, we’ll generally see moderately higher home prices."

03/06/2008 Prediction: 5.38 million units full year.
Yun "Significant price declines in some local markets have sharply and quickly improved local affordability conditions, and are inducing buyers to return to the marketplace"

04/08/2008 Prediction: 5.39 million units full year.
Yun "Exceptionally weak home sales related to jumbo loans problems will depress home prices in the first half of the year, but steady liquidity improvements in the conforming jumbo-loan market will help prices recover in the second half of the year"

05/08/2008 Prediction: 5.39 million units full year.
Yun "Although more than half of local markets are expected to see price growth this year, the aggregate existing-home price will decline 2.4 percent in 2008, driven by a relatively few markets that are very oversupplied"

06/09/2008 Prediction 5.4 million units full year.
Yun "We’re seeing healthy price gains in moderately priced areas like Erie, Pa., and Corpus Christi, Texas, and double-digit gains in others"

07/08/2008 Prediction 5.31 million units full year.
Yun "Interestingly, there have been reports of multiple bidding after the large price cuts, so it is possible that most of the price declines have already occurred in those markets."

08/08/2008 Prediction 5.51 million units full year.
Gaylord "buyers [will] get into the market to take advantage of the unprecedented drop in home prices in many areas, as well as a wide selection of inventory, to make an investment in their future,"

09/09/2008 Prediction 5.01 million units full year.
Yun "Nationally, home sales are stable now but are expected to increase in coming quarters."

10/08/2008 Prediction 5.04 million units full year.
Yun "What we’re seeing is the momentum of people taking advantage of low home prices…"

11/07/2008 Prediction 5.02 million units full year.
Yun "…we’re still in a broad period of stabilization"

12/09/2008 Prediction 4.96 million units full year.
Yun "Given the critical role of housing in an economic recovery, we’re confident sufficient (government) stimulus will be offered to bring more buyers to the market,"

ACTUAL: 4.912 million existing units sold in 2008

1/06/2009 Prediction 4.90 million units in 2008, 5.224 million units 2009.
Yun "With a proper real-estate focused (government) stimulus measure, home sales could rise more than expected, by more than 10 percent..."

2/02/2009 Prediction 4.912 million units in 2008, 5.116 million units 2009.
Yun "Forecasting is a hazardous sport at times. With so many pieces of the puzzle now moving in opposite directions, the crystal ball reading has become even cloudier."

NARcasting The Future: January 2009

An era has drawn to a close in NARland…

It appears that they have once again modified their forecasting strategy now eliminating the chief economist existing home sales forecast commentary from their regular monthly reporting.

Prior to the fall of 2007, NAR released an independent monthly forecast of existing home sales where their chief economist spun many of the predictions found below.

Then, throughout 2008, NAR merged the monthly existing home sales forecast commentary into the monthly pending home sales report effectively creating one report that covered the most leading home sales data combined with their forward looking “predictions”.

Now, it seems that NAR has decided to eliminate the existing home sales forecast commentary altogether.

The existing home sales forecast itself (the number not the commentary) DOES still exist though, released as one line of their monthly forecast for the “US Economic Outlook” but the commentary we have all grown to know and love is gone.

Don’t be sad though, chief economist Laurence Yun is still providing LOTS of general commentary especially in his almost daily “Quick Take” bloggy-like thing.

From now on I will continue to update this post but take whatever laughable forward looking NAR commentary I can find from either Yun or the new NAR president Charles McMillan.

12/11/2006 Prediction: 6.40 million units.
Lereah "Most of the correction in home prices is behind us."

1/10/2007 Prediction: 6.42 million units. Lereah "The good news is that the steady improvement in sales will support price appreciation moving forward."

2/7/2007 Prediction: 6.44 million units.
Lereah "After reaching what appears to be the bottom in the fourth quarter of 2006, we expect existing-home sales to gradually rise all this year and well into 2008."

3/13/2007 Prediction: 6.42 million units.
Lereah "Although existing-home sales will be marginally reduced due to subprime lending restrictions, they should be gradually rising this year and next."

4/11/2007 Prediction: 6.34 million units.
Lereah "Tighter lending standards will dampen home sales a bit, but by less than a couple of percentage points from initial projections."

4/30/2007
Lereah Leaves NAR for Move.com

5/9/2007 Prediction: 6.29 million units.
Yun "Housing activity this year will be somewhat lower than in earlier forecasts."

6/6/2007 Prediction: 6.18 million units.
Yun "Home sales will probably fluctuate in a narrow range in the short run, but gradually trend upward with improving activity by the end of the year."

7/11/2007 Prediction: 6.11 million units.
Yun "Home prices are expected to recover in 2008 with existing-home sales picking up late this year."

8/8/2007 Prediction: 6.04 million units.
Yun “With the population growing, the demand for homes isn’t going away – it’s just being delayed.”

9/11/2007 Prediction: 5.92 million units.
Yun “Patient buyers in most areas who do their homework will recognize that housing remains a good long-term investment.”

10/10/2007 Prediction: 5.78 million units.
Yun "The speculative excesses have been removed from the market and home sales are returning to fundamentally healthy levels, while prices remain near record highs, reflecting favorable mortgage rates and positive job gains."

11/13/2007 Prediction: 5.5 million units.
Yun "In some ways, the extended real estate boom from 2001 to 2005 created unrealistic expectations that housing is a short-term high-yield investment… 2007 will be the fifth best year for housing on record"

12/10/2007 Prediction: 5.67 million units in 2007, 5.7 million units in 2008.
Yun "The broad trend over the coming year will be a gradual rise in existing-home sales, but because sales are exceptionally low in the final months of 2007, total sales for 2008 will be only modestly higher than 2007."

ACTUAL: 5.652 million existing units sold in 2007

01/08/2008 Prediction: 5.66 million units in 2007, 5.7 million units in 2008.
Yun "A meaningful recovery in existing-home sales could occur as early as this spring, or it may be further delayed toward late 2008."

02/07/2008 Prediction: 5.38 million units full year.
Yun "Where builders have cut construction sharply, and in most areas with improving affordability conditions, we’ll generally see moderately higher home prices."

03/06/2008 Prediction: 5.38 million units full year.
Yun "Significant price declines in some local markets have sharply and quickly improved local affordability conditions, and are inducing buyers to return to the marketplace"

04/08/2008 Prediction: 5.39 million units full year.
Yun "Exceptionally weak home sales related to jumbo loans problems will depress home prices in the first half of the year, but steady liquidity improvements in the conforming jumbo-loan market will help prices recover in the second half of the year"

05/08/2008 Prediction: 5.39 million units full year.
Yun "Although more than half of local markets are expected to see price growth this year, the aggregate existing-home price will decline 2.4 percent in 2008, driven by a relatively few markets that are very oversupplied"

06/09/2008 Prediction 5.4 million units full year.
Yun "We’re seeing healthy price gains in moderately priced areas like Erie, Pa., and Corpus Christi, Texas, and double-digit gains in others"

07/08/2008 Prediction 5.31 million units full year.
Yun "Interestingly, there have been reports of multiple bidding after the large price cuts, so it is possible that most of the price declines have already occurred in those markets."

08/08/2008 Prediction 5.51 million units full year.
Gaylord "buyers [will] get into the market to take advantage of the unprecedented drop in home prices in many areas, as well as a wide selection of inventory, to make an investment in their future,"

09/09/2008 Prediction 5.01 million units full year.
Yun "Nationally, home sales are stable now but are expected to increase in coming quarters."

10/08/2008 Prediction 5.04 million units full year.
Yun "What we’re seeing is the momentum of people taking advantage of low home prices…"

11/07/2008 Prediction 5.02 million units full year.
Yun "…we’re still in a broad period of stabilization"

12/09/2008 Prediction 4.96 million units full year.
Yun "Given the critical role of housing in an economic recovery, we’re confident sufficient (government) stimulus will be offered to bring more buyers to the market,"

1/06/2009 Prediction 4.90 million units full year.
Yun " With a proper real-estate focused (government) stimulus measure, home sales could rise more than expected, by more than 10 percent..."

Question of The Day - Nationalize NAR?

Given the government’s willingness to bailout and nationalize failed Wall Street firms all, in a sense, in an effort to protect the wider economy from the after effects of largely unregulated and unfettered greed, shouldn’t they now direct their attentions to the National Association of Realtors (NAR)?

NAR played a primary role in pumping the housing ponzi-scheme and even today continues to promote self-interested spin and false information… isn’t it time that the whole real estate broker industry and process simply be nationalized?

NARcasting The Future: October 2008

Today, the National Association of Realtors (NAR) provided their latest estimate of annual existing home sales for 2008 revising slightly their total year sales forecast to 5.04 million units.

As usual, the latest forecast comes with another dose of truly ridiculous spin.

In an effort to put their absurd bias into perspective I compiled all their existing home sales forecasts for 2007 and now 2008 into a chart along with a list of prominent quotes supplied with each forecast.


12/11/2006 Prediction: 6.40 million units.
Lereah "Most of the correction in home prices is behind us."

1/10/2007 Prediction: 6.42 million units.
Lereah "The good news is that the steady improvement in sales will support price appreciation moving forward."

2/7/2007 Prediction: 6.44 million units.
Lereah "After reaching what appears to be the bottom in the fourth quarter of 2006, we expect existing-home sales to gradually rise all this year and well into 2008."

3/13/2007 Prediction: 6.42 million units.
Lereah "Although existing-home sales will be marginally reduced due to subprime lending restrictions, they should be gradually rising this year and next."

4/11/2007 Prediction: 6.34 million units.
Lereah "Tighter lending standards will dampen home sales a bit, but by less than a couple of percentage points from initial projections."

4/30/2007
Lereah Leaves NAR for Move.com

5/9/2007 Prediction: 6.29 million units.
Yun "Housing activity this year will be somewhat lower than in earlier forecasts."

6/6/2007 Prediction: 6.18 million units.
Yun "Home sales will probably fluctuate in a narrow range in the short run, but gradually trend upward with improving activity by the end of the year."

7/11/2007 Prediction: 6.11 million units.
Yun "Home prices are expected to recover in 2008 with existing-home sales picking up late this year."

8/8/2007 Prediction: 6.04 million units.
Yun “With the population growing, the demand for homes isn’t going away – it’s just being delayed.”

9/11/2007 Prediction: 5.92 million units.
Yun “Patient buyers in most areas who do their homework will recognize that housing remains a good long-term investment.”

10/10/2007 Prediction: 5.78 million units.
Yun "The speculative excesses have been removed from the market and home sales are returning to fundamentally healthy levels, while prices remain near record highs, reflecting favorable mortgage rates and positive job gains."

11/13/2007 Prediction: 5.5 million units.
Yun "In some ways, the extended real estate boom from 2001 to 2005 created unrealistic expectations that housing is a short-term high-yield investment… 2007 will be the fifth best year for housing on record"

12/10/2007 Prediction: 5.67 million units in 2007, 5.7 million units in 2008.
Yun "The broad trend over the coming year will be a gradual rise in existing-home sales, but because sales are exceptionally low in the final months of 2007, total sales for 2008 will be only modestly higher than 2007."

ACTUAL: 5.652 million existing units sold in 2007

01/08/2008 Prediction: 5.66 million units in 2007, 5.7 million units in 2008.
Yun "A meaningful recovery in existing-home sales could occur as early as this spring, or it may be further delayed toward late 2008."

02/07/2008 Prediction: 5.38 million units full year.
Yun "Where builders have cut construction sharply, and in most areas with improving affordability conditions, we’ll generally see moderately higher home prices."

03/06/2008 Prediction: 5.38 million units full year.
Yun "Significant price declines in some local markets have sharply and quickly improved local affordability conditions, and are inducing buyers to return to the marketplace"

04/08/2008 Prediction: 5.39 million units full year.
Yun "Exceptionally weak home sales related to jumbo loans problems will depress home prices in the first half of the year, but steady liquidity improvements in the conforming jumbo-loan market will help prices recover in the second half of the year"

05/08/2008 Prediction: 5.39 million units full year.
Yun "Although more than half of local markets are expected to see price growth this year, the aggregate existing-home price will decline 2.4 percent in 2008, driven by a relatively few markets that are very oversupplied"

06/09/2008 Prediction 5.4 million units full year.
Yun "We’re seeing healthy price gains in moderately priced areas like Erie, Pa., and Corpus Christi, Texas, and double-digit gains in others"

07/08/2008 Prediction 5.31 million units full year.
Yun "Interestingly, there have been reports of multiple bidding after the large price cuts, so it is possible that most of the price declines have already occurred in those markets."

08/08/2008 Prediction 5.51 million units full year.
Gaylord "buyers [will] get into the market to take advantage of the unprecedented drop in home prices in many areas, as well as a wide selection of inventory, to make an investment in their future,"

09/09/2008 Prediction 5.01 million units full year.
Yun "Nationally, home sales are stable now but are expected to increase in coming quarters."

10/08/2008 Prediction 5.04 million units full year.
Yun "What we’re seeing is the momentum of people taking advantage of low home prices…"

NARcasting The Future: February 2008

Today, the National Association of Realtors (NAR) provided their latest estimate of annual existing home sales for 2008 revising down their prior estimate to a 4.9 million unit annual pace for the first half of the year and revising up the estimate to 5.8 million unit annual pace in the second half.

Given the truly awful quality of forecasts provided by NAR economists, I’m going to stick with their estimate for the first half of the year giving them less room for egregious error.

As usual, the latest forecast comes with another dose of truly ridiculous spin.

In an effort to put their absurd bias into perspective I compiled all their existing home sales forecasts for 2007 and now 2008 into a chart along with a list of prominent quotes supplied with each forecast.

12/11/2006 Prediction: 6.40 million units.
Lereah "Most of the correction in home prices is behind us."

1/10/2007 Prediction: 6.42 million units.
Lereah "The good news is that the steady improvement in sales will support price appreciation moving forward."

2/7/2007 Prediction: 6.44 million units.
Lereah "After reaching what appears to be the bottom in the fourth quarter of 2006, we expect existing-home sales to gradually rise all this year and well into 2008."

3/13/2007 Prediction: 6.42 million units.
Lereah "Although existing-home sales will be marginally reduced due to subprime lending restrictions, they should be gradually rising this year and next."

4/11/2007 Prediction: 6.34 million units.
Lereah "Tighter lending standards will dampen home sales a bit, but by less than a couple of percentage points from initial projections."

4/30/2007
Lereah Leaves NAR for Move.com

5/9/2007 Prediction: 6.29 million units.
Yun "Housing activity this year will be somewhat lower than in earlier forecasts."

6/6/2007 Prediction: 6.18 million units.
Yun "Home sales will probably fluctuate in a narrow range in the short run, but gradually trend upward with improving activity by the end of the year."

7/11/2007 Prediction: 6.11 million units.
Yun "Home prices are expected to recover in 2008 with existing-home sales picking up late this year."

8/8/2007 Prediction: 6.04 million units.
Yun “With the population growing, the demand for homes isn’t going away – it’s just being delayed.”

9/11/2007 Prediction: 5.92 million units.
Yun “Patient buyers in most areas who do their homework will recognize that housing remains a good long-term investment.”

10/10/2007 Prediction: 5.78 million units.
Yun "The speculative excesses have been removed from the market and home sales are returning to fundamentally healthy levels, while prices remain near record highs, reflecting favorable mortgage rates and positive job gains."

11/13/2007 Prediction: 5.5 million units.
Yun "In some ways, the extended real estate boom from 2001 to 2005 created unrealistic expectations that housing is a short-term high-yield investment… 2007 will be the fifth best year for housing on record"

12/10/2007 Prediction: 5.67 million units in 2007, 5.7 million units in 2008.
Yun "The broad trend over the coming year will be a gradual rise in existing-home sales, but because sales are exceptionally low in the final months of 2007, total sales for 2008 will be only modestly higher than 2007."

01/08/2008 Prediction: 5.66 million units in 2007, 5.7 million units in 2008.
Yun "A meaningful recovery in existing-home sales could occur as early as this spring, or it may be further delayed toward late 2008."

02/07/2008 Prediction: 4.9 million units.
Yun "Where builders have cut construction sharply, and in most areas with improving affordability conditions, we’ll generally see moderately higher home prices."

NARcasting The Future: November 2007

Today, the National Association of Realtors (NAR) released yet another downward revision to their outlook for existing home sales for 2007 along with another dose of truly ridiculous spin.

In an effort to put their absurd bias into perspective I compiled all their forecasts for 2007 home sales into a chart along with a list of prominent quotes supplied with each forecast.


12/11/2006 Prediction: 6.40 million units.
Lereah "Most of the correction in home prices is behind us."

1/10/2007 Prediction: 6.42 million units.
Lereah "The good news is that the steady improvement in sales will support price appreciation moving forward."

2/7/2007 Prediction: 6.44 million units.
Lereah "After reaching what appears to be the bottom in the fourth quarter of 2006, we expect existing-home sales to gradually rise all this year and well into 2008."

3/13/2007 Prediction: 6.42 million units.
Lereah "Although existing-home sales will be marginally reduced due to subprime lending restrictions, they should be gradually rising this year and next."

4/11/2007 Prediction: 6.34 million units.
Lereah "Tighter lending standards will dampen home sales a bit, but by less than a couple of percentage points from initial projections."

4/30/2007
Lereah Leaves NAR for Move.com

5/9/2007 Prediction: 6.29 million units.
Yun "Housing activity this year will be somewhat lower than in earlier forecasts."

6/6/2007 Prediction: 6.18 million units.
Yun "Home sales will probably fluctuate in a narrow range in the short run, but gradually trend upward with improving activity by the end of the year."

7/11/2007 Prediction: 6.11 million units.
Yun "Home prices are expected to recover in 2008 with existing-home sales picking up late this year."

8/8/2007 Prediction: 6.04 million units.
Yun “With the population growing, the demand for homes isn’t going away – it’s just being delayed.”

9/11/2007 Prediction: 5.92 million units.
Yun “Patient buyers in most areas who do their homework will recognize that housing remains a good long-term investment.”

10/10/2007 Prediction: 5.78 million units.
Yun "The speculative excesses have been removed from the market and home sales are returning to fundamentally healthy levels, while prices remain near record highs, reflecting favorable mortgage rates and positive job gains."

11/13/2007 Prediction: 5.5 million units.
Yun "In some ways, the extended real estate boom from 2001 to 2005 created unrealistic expectations that housing is a short-term high-yield investment… 2007 will be the fifth best year for housing on record"

Realtor’s Follies (A Slight Return)

Some of you may recall a post I wrote in September 2006 that chronicled the details surrounding the then President of the National Association of Realtors (NAR), Thomas M. Stevens, inability to sell his own home.

At that time, the house had an unchanged listing price of $1,450,000 and had been sitting on the market for just over 350 days.

Obviously, this was a bit embarrassing for both Stevens and the NAR as was made perfectly apparent during both a Washington Post article and a subsequent CNBC interview.

"Who knew last September how long this down trend was going to continue, … You need to adjust the price. . . . But I didn't do that. And my house is still on the market."

"What I should have done, was listened to my agent and cut the price by $50,000 to $100,000 early on, and the property would have sold last October. … I should have listed it a month earlier,"

Stevens, who is also the Senior Vice President of NRT, the nation’s largest residential real estate brokerage, continued to leave the price unchanged for months afterward which, combined with an obviously declining housing market, kept the property sitting vacant and unsold until sometime in early 2007 when the listing was pulled from the MLS.

At that time, I had assumed that the property had simply sold but was unable to verify that fact.

Now though, and thanks to the super astute fellow blogger AUA of DirectCurrent who recently found the house again on the market, it appears that it DIDN’T SELL… EVEN AFTER SIGNIFICANT PRICE REDUCTIONS!

Yes… You heard right… the house is STILL on the market (click for... listing, zillow, video, etc.) and now with a listing price of $1,285,000.

That’s roughly 766 days on the market and $165,000 of price reductions and STILL NO TAKERS!

This has got to be one of the best indicators of the truly phenomenal downturn the nation’s housing markets are experiencing.

Furthermore, if a sophisticated and leading residential real estate broker and former president of the National Association of Realtors can’t accurately price and sell his own home, then how can any member Realtor be trusted to “evaluate your situation?”

The Daily 2¢ - New Campaign, Old Scam

There just doesn’t seem to be ANY limit to the depths to which the truly underhanded National Association of Realtors (NAR) will reach in attempting to protect their own self interest.

Their new ad campaign, which apparently replaces last year’s ads promoting the absurd notion that “It’s a Great Time to Buy or Sell a Home”, shows (see ad above) what looks to be a 4 year old in a backyard swing with the title “Buying a Home is a Great Way To Build Long Term Wealth, There are Some Other Important Dividends Too”.

Along with the ludicrous “tug at the heartstrings” comes some “facts” to back up their claims ranging from “the value of a home nearly doubles every 10 years” and “the average homeowner has 36 times the wealth of the average renter” to the pièce de résistance… “the best way to evaluate your situation and options is to contact a Realtor”.

They are truly a desperate and reprehensible outfit.

What’s going to be next year’s campaign?

Possibly a cute little puppy being held firmly around the neck with snub nose pressed to its head and the tagline “Buy a home or this bitch dies!”

At this point, I wouldn’t be too surprised…

Am I alone in thinking that NAR’s attempts to persuade unsuspecting people into “investing” in a depreciating asset as large as a home, simply to serve the interests of their organization and its members is tantamount to fraud and should be prosecuted?

NARcasting The Future: October 2007

Today, the National Association of Realtors (NAR) released yet another downward revision to their outlook for existing home sales for 2007 along with another dose of truly ridiculous spin.

In an effort to put their absurd bias into perspective I compiled all their forecasts for 2007 home sales into a chart along with a list of prominent quotes supplied with each forecast.


12/11/2006 Prediction: 6.40 million units.
Lereah "Most of the correction in home prices is behind us."

1/10/2007 Prediction: 6.42 million units.
Lereah "The good news is that the steady improvement in sales will support price appreciation moving forward."

2/7/2007 Prediction: 6.44 million units.
Lereah "After reaching what appears to be the bottom in the fourth quarter of 2006, we expect existing-home sales to gradually rise all this year and well into 2008."

3/13/2007 Prediction: 6.42 million units.
Lereah "Although existing-home sales will be marginally reduced due to subprime lending restrictions, they should be gradually rising this year and next."

4/11/2007 Prediction: 6.34 million units.
Lereah "Tighter lending standards will dampen home sales a bit, but by less than a couple of percentage points from initial projections."

4/30/2007
Lereah Leaves NAR for Move.com

5/9/2007 Prediction: 6.29 million units.
Yun "Housing activity this year will be somewhat lower than in earlier forecasts."

6/6/2007 Prediction: 6.18 million units.
Yun "Home sales will probably fluctuate in a narrow range in the short run, but gradually trend upward with improving activity by the end of the year."

7/11/2007 Prediction: 6.11 million units.
Yun "Home prices are expected to recover in 2008 with existing-home sales picking up late this year."

8/8/2007 Prediction: 6.04 million units.
Yun “With the population growing, the demand for homes isn’t going away – it’s just being delayed.”

9/11/2007 Prediction: 5.92 million units.
Yun “Patient buyers in most areas who do their homework will recognize that housing remains a good long-term investment.”

10/10/2007 Prediction: 5.78 million units.
Yun "The speculative excesses have been removed from the market and home sales are returning to fundamentally healthy levels, while prices remain near record highs, reflecting favorable mortgage rates and positive job gains."

NARcasting The Future: August 2007

Last week, the National Association of Realtors (NAR) released yet another downward revision to their outlook for existing home sales for 2007 along with another dose of truly ridiculous spin.

In an effort to put their absurd bias into perspective I compiled all their forecasts for 2007 home sales into a chart along with a list of prominent quotes supplied with each forecast.


12/11/2006 - Prediction: 6.40 million units
Lereah "Most of the correction in home prices is behind us."

1/10/2007 - Prediction: 6.42 million units
Lereah "The good news is that the steady improvement in sales will support price appreciation moving forward."

2/7/2007 - Prediction: 6.44 million units
Lereah "After reaching what appears to be the bottom in the fourth quarter of 2006, we expect existing-home sales to gradually rise all this year and well into 2008."

3/13/2007 Prediction: 6.42 million units
Lereah "Although existing-home sales will be marginally reduced due to subprime lending restrictions, they should be gradually rising this year and next."

4/11/2007 Prediction: 6.34 million units
Lereah "Tighter lending standards will dampen home sales a bit, but by less than a couple of percentage points from initial projections."

4/30/2007
Lereah Leaves NAR for Move.com

5/9/2007 Prediction: 6.29 million units
Yun "Housing activity this year will be somewhat lower than in earlier forecasts."

6/6/2007 Prediction: 6.18 million units
Yun "Home sales will probably fluctuate in a narrow range in the short run, but gradually trend upward with improving activity by the end of the year."

7/11/2007 Prediction: 6.11 million units
Yun "Home prices are expected to recover in 2008 with existing-home sales picking up late this year."

8/8/2007 Prediction: 6.04 million units
Yun “With the population growing, the demand for homes isn’t going away – it’s just being delayed.”

Constructing Capitulation: June 2007

Looking back at June’s results (released in July) it safe to say that the weakening demand and an ongoing mortgage credit crisis are continuing to weigh heavily on the nation’s housing markets, sending them spiraling down yet another leg in this unprecedented housing decline.

The advance GDP Report for Q2 2007 continued to show a significant drag coming from the decline in residential fixed investment as well as significant revisions to past GDP results better demonstrating the pronounced effects this drag has had for the last four quarters.

The following chart shows real residential and non-residential fixed investment versus overall GDP since Q1 2003 (click for larger version).

The housing weakness also appears to clearly show up in retail sales as consumers pullback on spending for some of the most discretionary of goods.



The National Association of Realtors (NAR) released their fifth consecutive downward revision to their annual home sales forecast for 2007 putting the current outlook far below the “rose colored” initial predictions from the start of the year.

Homebuilder confidence continues to decline to near multi-decade lows with respondents indicating that estimates of “present” and “future” conditions as well as buyer traffic continues to slump.

The Census Department’s New Residential Construction Report which continued to indicate significant weakness in the nation’s housing markets and for residential construction showing substantial declines on a year-over-year basis to single family permits both nationally and across every region.

The Census Department’s New Residential Home Sales Report that, renewed declines, even accelerating in some regions, as well as significant downward revisions to last month’s results.

As with prior months, on a year-over-year basis sales are still declining in the double digits at 22.27% below the sales activity seen in June 2006.

NAR’s Existing Home Sales Report showing additional confirmation that the nation’s housing markets are continuing to experience weakness with EVERY regions showing considerable declines to sales as well as continued increases to inventory and monthly supply.

The May 2007 results of the S&P/Case-Shiller Indices are continued to show weakness for the nation’s housing markets with 15 of the 20 metro areas tracked reporting significant declines.

Topping the list of decliners on a year-over-year basis was Detroit at -11.06%, San Diego at -6.96%, Tampa at -6.67%, Washington DC at -6.34%, Phoenix at -5.55, Boston at -4.29% and Las Vegas at -4.10%.

Furthermore, comparing the last major downturn in the late 80s and early 90s to the current data may indicate that the current housing downturn is in its infancy with year-over-year declines only just having materialized in the last eleven months.


June's Pending Home Sales Report for June 2007 showing a continuation of the historic decline to residential housing on a month-to-month and year-over-year basis, both nationally and in every region.

The Census Department’s Construction Spending Report for June again demonstrated the significant extent to which private residential construction spending is contracting.

With the weakening trend continuing, total residential construction spending fell -16.39% as compared to June 2006 while private single family construction spending declined by a grotesque -25.82%.

Key Report Details:

• The seasonally adjusted annul rate of private residential construction spending has now dropped 21.80% from the peak set back in February 2006.
• Overall private residential construction spending dropped -16.39% as compared to June 2006.
• Single Family residential construction spending dropped 25.82% as compared to June 2006.

The following charts show changes to construction spending (click for larger version):

Pending Decline: June 2007 Pending Home Sales Report

Last week, the National Association of Realtors (NAR) released their Pending Home Sales Report for June 2007 showing a continuation of the historic decline to residential housing on a year-over-year basis, both nationally and in every region.

Additionally, the Northeast and Midwest regions have fallen back below 100 indicating that, seasonally adjusted, June’s home sales activity was BELOW the average activity recorded in 2001, the first year Pending Home Sales were tracked.

As usual, NARs Chief Economist, Laurence Yun takes a clumsy crack at false optimism insinuating that a bottom in declining demand may have already been reached and possibly even past.

“However, it is too early to say if home sales have already passed bottom, … Still, major declines in home sales are likely to have occurred already and further declines, if any, are likely to be modest given the accumulating pent-up demand.”

The following chart shows the national Pending Homes Sales Index since 2005 compared monthly. Notice that each year, the months value is decreasing consistently (click for larger version).

The following chart shows the year-over-year changes to the national Pending Home Sales index as well as comparing the latest results against the values seen in the peak year of 2005 (click for larger version).

The following chart shows the pending home sales index nationally and for each region tracked (click for larger version).

Note that in the above charts, I had to use the Not Seasonally Adjusted (NSA) data series as NAR changed the methodology for their Seasonally Adjusted (SA) series a while back and never republished the numbers. This is why none of the data appears to be breaking below a value of 100 because it’s the SA series that is now below 100.

Keep in mind the current pending sales decline comes ON TOP of last years historic fall-off so the continued weakness is a sure sign that the decline is not ephemeral.

Look at the June seasonally adjusted pending home sales results and draw your own conclusion:

• Nationally the index was down 8.6% as compared to June 2006.
• The Northeast region was down 2.4% as compared to June 2006.
• The West region was down 5.5% as compared to June 2006.
• The Midwest region was down 8.2% as compared to June 2006.
• The South region was down 12.7% as compared to June 2006.

So it appears that, year-over-year, contract activity is still dropping rather sharply with ALL regions continuing to show significant declines.

NARcasting The Future!

The National Association of Realtors (NAR) today released another downward revision to their outlook for existing home sales for 2007 along with another dose of truly preposterous spin.

In an effort to put their absurd bias into perspective I compiled all their forecasts for 2007 home sales into a chart along with a list of prominent quotes supplied with each forecast (click for larger version).


12/11/2006
Lereah "Most of the correction in home prices is behind us."

1/10/2007
Lereah "The good news is that the steady improvement in sales will support price appreciation moving forward."

2/7/2007
Lereah "After reaching what appears to be the bottom in the fourth quarter of 2006, we expect existing-home sales to gradually rise all this year and well into 2008."

3/13/2007
Lereah "Although existing-home sales will be marginally reduced due to subprime lending restrictions, they should be gradually rising this year and next."

4/11/2007
Lereah "Tighter lending standards will dampen home sales a bit, but by less than a couple of percentage points from initial projections."

4/30/2007
Lereah Leaves NAR for Move.com

5/9/2007
Yun "Housing activity this year will be somewhat lower than in earlier forecasts."

6/6/2007
Yun "Home sales will probably fluctuate in a narrow range in the short run, but gradually trend upward with improving activity by the end of the year."

7/11/2007
Yun "Home prices are expected to recover in 2008 with existing-home sales picking up late this year."

Bust From The Past: June 2007

In a new and recurring post, Ill attempt to compare various housing trends from today’s housing bust to similar trends seen during past housing declines.

The method is simple, take data from the deceleration, peak and decline of past housing busts and overlay them with data from today’s results.

What we may see is that the data correlates well, giving us some sense on what to expect in the future for housing.

Of course, comparing data from different eras is not a perfect science leaving most Bulls to invariably raise the many tired “things are different this time” arguments, but surely there must be something to learn from this type of analysis.

At the very least, if over time the data continues to correlate well, we’ll see that and if it starts to diverge we’ll see that as well

For this first installment I plotted the S&P/Case-Shiller Composite Index comparing the deceleration and decline of home prices seen during the 80s-90s housing bust to the results we are seeing today.

What’s most interesting about this particular comparison is that it highlights how young the current housing decline is, having only posted three consecutive year-over-year (YOY) monthly declines to home prices.

The last cycle yielded nineteen consecutive months of YOY home price declines followed by an additional twenty two months after a short three month positive respite (click the following chart for larger version).

Looking at the actual index values normalized and compared from the respective peaks, you can see that we are only nine months into a decline that, last cycle, lasted for roughly fifty four months during the last cycle (click the following chart for larger version).

Also, it appears that price declines seen during the current downturn are actually occurring faster, falling roughly the same amount during the first nine months as seen during the first fourteen months last cycle.

Another important note is that it appears we may be currently at the point in the down-cycle where prices drop most significantly in the smallest period of time.

During the last downturn, the next nine months produced 65% of the total decline to home prices seen peak to trough.

So it seems that we are likely only in the beginning stages of the home price adjustment and that, all things being equal, we may have to wait another few years for prices to set a bottom.

Weekly Mortgage Application Data

With all the news surrounding PIMCO's Bill Gross and the Treasury’s 10 year note yield spiking over 5%, now is probably a good time to start keeping track of mortgage rates and related data.

The Mortgage Bankers Association (MBA) publishes a weekly applications survey that covers roughly 50 percent of all residential mortgage originations and tracks the average interest rate for 30 year and 15 year fixed rate mortgages as well as application volume for both purchase and refinance applications.

The purchase application index has been highlighted as a particularly important data series as it very broadly captures the demand side of residential real estate for both new and existing home purchases.

In fact, it was this very data series that former Federal Reserve Chairman Alan Greenspan cited last October when issuing his now obviously wrong “Worst may well be over” forecast.

“I suspect that we are coming to the end of this downtrend, as applications for new mortgages, the most important series, have flattened out,”

As we all know, especially those of us living in the bubbliest areas, our housing markets are now especially rate sensitive.

We have come through an unprecedented era of home price inflation that, toward the end of the up-cycle, resulted in an equally historic decline to affordability forcing many buyers to seek the lowest possible (initial) interest rate loan products in an effort to stretch their buying power.

In many ways, we have painted ourselves into a corner where equilibrium between price and demand has only been reached through the help of extraordinarily low interest rates.

One should remember that it was not long ago that 7.0% on a 30 fixed rate mortgage was considered very attractive and even low by historic standards.

Furthermore, there is likely not an economist out there that would deny that 30 year fixed mortgage interest rates could climb above 6.5% or even 7.0% or beyond in the coming years or even months.

Is it really likely that rates will permanently stay in the low 6’s?

Probably not, and unless incomes make some significant strides, it seems that any move up in rates will surely result in a move down in housing demand and prices.

To that end, Ill periodically post the following charts that track the MBA application data and average interest rates.

The latest data is showing that the average rate for a 30 year fixed rate mortgage has now reached a peak for the year at 6.35% with the refinance volume declining measurably to the lowest level since the first week of January.

It’s important to note that the data is reported (and charted) weekly and that the rate data represents average interest rates, and the index data represents mortgage loan application volume for home purchases, home refinances and a composite of all loans.

Ill expand these charts to span back much farther in later posts so you can get a better perspective on where this data was through the latest cycle so be sure to check back.

The following chart shows the average interest rate for 30 year and 15 year fixed rate mortgages over the last number of weeks (click for larger version).

The following charts show the Purchase Index, Refinance Index and Market Composite Index since January 2007 (click for larger versions).

Constructing Capitulation: April 2007

Not only did April’s results show further weakening of the nations housing markets, it also provided definitive proof that the housing decline is having a significant and undeniable negative impact on the overall economy.

The latest preliminary GDP report confirms that the historic decline to residential fixed investment continues weigh heavily the US economy with GDP registering a mere 0.6% for Q1 2007 a fact now not so underestimated by the Federal Reserve Chairman Bernanke.

“Of course, the adjustment in the housing sector is still ongoing, and the slowdown in residential construction now appears likely to remain a drag on economic growth for somewhat longer than previously expected.”

“The incoming data on new home sales and inventories suggested that the ongoing adjustment in the housing market would probably persist for longer than previously anticipated. In particular, the demand for new homes appeared to have weakened further in recent months, and the stock of unsold homes relative to sales had increased sharply.”

The following chart shows real residential and non-residential fixed investment versus overall GDP since Q1 2003 (click for larger version).

The housing weakness also appears to clearly show up in retail sales as consumers pullback on spending for some of the most discretionary of goods.

The recent National Association of Realtors Pending Home Sales Report, a forward-looking indicator, confirms that demand for existing homes continues to trend down as seen in the following chart (click for larger version).

Note, that the Pending Home Sales data shows that demand for existing homes has been steadily trending down, a fact that is more obvious if you compare the latest results to the peak results seen in 2005 shown below.

The Census Department’s New Residential Construction Report showing continued weakness to both permits and starts that, when smoothed and averaged, clearly indicates and predicts an accelerating slowdown.

The Census Department’s New Residential Home Sales Report that, while vexing traditional media sources, clearly showed a decline in sales activity for new homes priced at or above $300,000 while also showing a significant jump in sales for new homes priced below that, especially below $200,000.

There now is ample evidence to suggest that the pricing trends for new homes that was established during the historic run-up are now in the process of reverting as homebuilders slash prices to counter slumping demand.

NAR’s Existing Home Sales Report showing continued uniform weakness in sales activity resulting in year-over-year declines for every region and across every home type as well as many significant declines to median selling prices.

The March 2007 results of the S&P/Case-Shiller Indices are continuing to show substantial declines to home prices in virtually every tracked market while housing futures continue to predict still further declines.

In a recent conference call, Bob Toll, CEO of Toll Brothers (NYSE:TOL), offered a conflicting point of view to Treasury Secretary Paulson’s optimistic outlook on housing.

“I think what that indicates is that most new homebuilders that are large, the public homebuilders, their average product goes anywhere from about $250K up to us which is about $700,000 so obviously the increase [in sales] is taking place below our space. Which means that we’re not out of the woods yet. I took with surprise yesterday and it’s now confirmed today by this analysis when the secretary of the treasury said that we’ve got the hard times pretty much behind us I wondered how many communities he had and where he got that information but I now understand that the information he got hadn’t been pealed away, I guess, to show that it was $150,000 housing. So I would say that we have not got the bad times behind us yet though it could be… you never know.”

Furthermore, Toll Brothers reported $119.7 million of pretax write-downs that served to depress their net income by an astounding 79% in the second quarter of 2007.

Finally, the Census Department’s Construction Spending report for April again demonstrated the significant extent to which private residential construction spending is contracting.

With the weakening trend continuing, total residential construction spending fell 14.41% as compared to April 2006 while private single family construction spending declined by a grotesque 25.60%.

Key Report Details:

• The seasonally adjusted annul rate of private residential construction spending has now dropped 15.41% from the peak set back in December of 2005.
• Overall private residential construction spending dropped 14.41% as compared to April 2006.
• Single Family residential construction spending dropped 25.60% as compared to April 2006.

The following charts show changes to construction spending (click for larger version):