NAR's Chief Economist: Totally Clueless

If you want to see how clueless the NAR's Chief Economist is (as are many in the Real Estate Industry), look no further than the recent home sales report:

(From the NY Times): "The National Association of Realtors said its seasonally adjusted index of pending sales for existing homes fell 3.2 percent to a reading of 86.5 from an upwardly revised June reading of 89.4. The index was 6.8 percent below year-ago levels.

Home sales are considered pending when the seller has accepted an offer, but the deal has not closed. Typically there is a one- to two-month lag before a sale is completed.

Wall Street economists surveyed by Thomson/IFR had predicted the index would fall to 88.6. The index, which sunk to a record low of 83 in March, stood at 92.2 in July 2007.

Lawrence Yun, the trade group’s chief economist, forecasts that home sales are on a pace to fall 11 percent from last year to just over 5 million in 2008. Mr. Yun said stringent lending criteria by Fannie Mae (FNM) and Freddie Mac (FRE) — the mortgage finance companies taken over by the government this weekend — held back sales activity.

Many in the real estate industry are hopeful that these standards will be relaxed with Fannie and Freddie under government control, but the outlook remains uncertain."

Hello McFly, lax lending standards are large part of the reason we have a credit crunch, housing crisis, et al., not to mention the fact that the mortgage GSEs did (in fact) increase their investment activities over the past 12 months and nearly went under despite their allegedly "stringent" lending criteria.

Blaming the GSEs' lending criteria for a slowdown in home sale is idiotic when the real truth is that housing is going through a necessary correction after a period of hyper-inflation driven by bad lending standards, and people spending above their means, a reality that few (apparently) wish to accept. Not to mention the fact that asking for the GSE's lending criteria to be relaxed is asinine, when it's plainly obvious to anyone who has a solid grasp of 4th math that what the GSEs need to do is reduce their scope, drastically curtail their investment activities and focus on getting their finances in order.

Anyone pushing for the GSEs to relax their standards increase their investment activities/scope, etc, is practically begging for disaster

Unfortunately I hold the minority opinion on this one, because the government is pushing to expand the size of the mortgage GSEs investment portfolios (a move that is supported by many) and will (in all likelihood) create a bigger economic calamity down the line.

As for the NAR's report itself the results aren't especially surprising, and they're a clear example of why it's better to focus on multi-month trends as opposed to declaring a housing bottom based on the data from one month.

You can read the entire article here.

Sources
The Associated Press (Via the NY Times): "Pending Home Sales Declined in July" -- September 9, 2008.

Disclosure: At the time of publishing the author didn't own a position in any of the companies mentioned in this article.

Comments

[tk6910:]

To say Lawrence Yun is clueless is being too kind. Lawrence Yun is a whor* with a PhD getting paid by NAR, a trade group.

2008 Sep 11 09:24 AM

[Dans Deep C...:]

Realtors are in the "it's a good time to buy business," always have been, always will be. For months they had been preaching about it being a great time to buy because of low interest rates. Now that they are even lower do you think they're telling all those people they persuaded to buy over the last few months that they should have waited for even better deals in terms of both purchase price and interest rate? I don't think so! Patience is a virtue and from my experience the Realtors I have dealt with have none of it, they all want the full commission right now. And they got all of them a few years back, now they want next year's commission right now too.

dansdeepcreekblog.blog...

2008 Sep 11 05:59 PM

[Dans Deep C...:]

Here's another good example of a clueless Realtor:

dansdeepcreekblog.blog...

2008 Sep 11 06:14 PM

[Angry Appra...:]

might be the 997th article i have read on the same topic reiterating the same thing.

2008 Sep 11 08:44 PM

[notsosmart:]

folks.all have an agenda.think for yourself.believe nothing about anything anytime.dont be pushed by anybody.unless its an emergency-sleep on it.

2008 Sep 12 10:21 AM

[Rhino Marke...:]

I agree with the comments made in this article about NAR's chief economists.
David Lereah, NAR's former chied economist, wrote after leaving NAR, when declaring there "is no bubble" in 2006, he had been instructed by NAR to make this position stick in presenting statistics (paraphrasing).
Of course, he and the NAR were radically and embarrassingly wrong. In their own industry! How could they have been so misguided ?

Beyond the immediate conclusion that their motives were pure self-interest...
Were they trying to reassure the public so there would be no mass panic in the market ?
Or did they think they were going to be able to mislead the public for at least another decade during which time the problems would miraculously solve themselves? This while the very obvious signs of impending meltdown were apparent in the rest of the economy and very clear to any reasoning person.

I am a Realtor. I have been advising my clients since 2006 of what was to come and how to strategize for it. One small indication of impending trouble was the bankruptcy laws being tightened up. But even ln the worst case scenario one could not have predicted how badly the whole world was going to be affected and then have that boomerang back at us.
Reassurance for me was that we would all be in it. And that the government would probably step in to help the housing market. But that seems to be the last for consideration, whereas it should have been the first for the "bailout/stimulis" funds.
No matter how much money is poured into the economy, nothing will improve until the consumer is reassured, and that will take a long time. It will take an even longer time for the real estate market to come around. There is very little cooperation from banks/money lenders in solving the foreclosure crisis. And when the housing market does begin to improve, it willl not be back at these price levels for a while. Volume of activity has improved in some areas, those where foreclsoure and bankruptcies are providing bargains. Dragging median prices abysmally low.

To get back to the NAR and motives.
Preserving the industry through misguided intention, can be the best assignation of a motive.
In my opinion, this is similar to a mayor of a resort town, on being informed that a tsunami is going to strike his town in 24 hours, decides rather than panic the tourists, he is not going to warn them.

NAR could have been a leader in guiding and preparing the housing industry intelligently towards this disaster, mitigating some of the damages and economic fallout.
Any Realtor or NAR represenative who continues to say this is the best time to buy, or predict when the market will turn around, is suspect. It is impossible to predict. There is no precedence for these times, although there have been similar ones, but none that have impacted the whole globe at the same time. And recovery measures will have unpredictable results.

The encouraging news is that there are good qualified Buyers.
I would advise my fellow Realtors to stop misleading Buyers with potentially harmful misinformation about the recovery of the market and instead educate your Sellers on pricing realistically; how to mitigate some of their property's market value losses and how to position themselves to survive these times

Feb 13 04:26 PM

[mellisa:]

Realtors are in the "it's a good time to buy business," always have been, always will be. For months they had been preaching about it being a great time to buy because of low interest rates. Realtors I have dealt with have none of it, they all want the full commission right now. And they got all of them a few years back, now they want next year's commission right now too.

----------------------...

mellisa

AoC Gold

Apr 06 02:54 AM