Tuesday, June 12, 2007

Here We Go Again!: Harvard’s State of The Nation’s Housing 2007

Like the sound of a really underhanded and unethical, broken and tired record, Harvard’s Joint Center for Housing Studies has today released their 2007 State of the Nation’s Housing Report.

It’s important to keep in mind that this “outfit”, although unfortunately being festooned with the name of one of our country’s most prestigious universities, is directly funded by none other than our country’s greatest real estate industry institutions.

The following is the list of the center’s “supporters”:

  • National Association of Realtors®
  • National Association of Home Builders
  • Fannie Mae Foundation
  • Federal Home Loan Banks
  • Freddie Mac
  • Housing Assistance Council
  • National Association of Affordable Housing Lenders
  • National Association of Housing and Redevelopment Officials
  • National Association of Local Housing Finance Agencies
  • National Council of State Housing Agencies
  • National Housing Conference
  • National Housing Endowment
  • National League of Cities
  • National Low Income Housing Coalition
  • National Multi Housing Council
  • Research Institute for Housing America
Aside from that, I think the opening paragraph of this years farce says it all:

“After setting records for home sales, single-family starts, and house price appreciation in 2005, housing markets abruptly reversed last year. In 2006, total home sales fell 10 percent, starts tumbled 13 percent, and nominal house price appreciation slowed to just a few percentage points. Suddenly, it was inventories of unsold vacant homes that set records and homes in foreclosure that were making the news.

The length and depth of the current correction will depend on the course of employment growth and interest rates, as well as the speed with which builders pare down excess supply. But the longer term outlook for housing is more upbeat. Thanks in large part to recent immigrants and their native-born children, household growth between 2005 and 2015 should exceed the strong 12.6 million net increase in 1995–2005 by some 2.0 million. Together with the enormous increase in household wealth over the past 20 years, healthy income growth will help propel residential spending to new heights.

It is simply astounding that given the opportunity to possibly present a measured analysis, especially in light of the plainly obvious fact that our nation’s housing markets are now in deep trouble having been grotesquely inflated by years of rampant speculation which has now all but vanished, this group continues to try desperately to fan the embers in hopes that the mania might reignite.

The reason this irks me so is that this is, unfortunately, a very widely read and important report to traditional media sources.

You will see this information reported everywhere today and this week and bits and pieces will be regurgitated over and over for the remainder of the year.

Yet it is a clearly inaccurate report which goes to great pains to either underreport or offset any possible existing and future negative outlook with absurd real estate industry jargon.

There are many great looking charts and some solid factual accounts but the conclusion is always the same, i.e. the outlook for residential real estate is strong.

While continuing to offer up superficially reasoned arguments for the strength of future housing demand such as immigration, Baby Boomer demographics and the aging if housing stock, the report never mentions that these factors, even if they were accurate, would be not be cause to speculate.

Here’s an excerpt from their Outlook for Homeownership:

“Looking past the current correction, homeownership is still clearly the tenure of choice. In addition, strong gains in income and wealth will favor ownership of both first and second homes.”

To put things in better perspective, just read at last years opening paragraph to see if you think their outlook then was accurate:

“The housing boom came under increasing pressure in 2005. With interest rates rising, builders in many states responded to slower sales and larger inventories by scaling back on production. Meanwhile, the surge in energy costs hit household budgets just as higher interest rates started to crimp the spending of homeowners with adjustable mortgages.

Nevertheless, the housing sector continues to benefit from solid job and household growth, recovering rental markets, and strong home price appreciation. As long as these positive forces remain in place, the current slowdown should be moderate.”