NAR and Housing Forecasts

by: Barry Ritholtz

With the oft hallucinatory David Lereah now gone from the NAR, one would expect hope that the Realtor Group would take off the cheerleading outfit and get real.

So far, that wish appears to be unfulfilled. There have been only grudging signs of any reality check taking place. Wednesday's NAR release noted:

"Existing-home sales are projected to total 6.18 million in 2007 and 6.41 million next year, in contrast with 6.48 million in 2006. New-home sales are forecast at 860,000 this year and 901,000 in 2008, down from 1.05 million last year.  Housing starts are likely to total 1.43 million units in 2007 and 1.49 million next year, below the 1.80 million recorded in 2006.

The national median existing-home price should ease by 1.3 percent to $219,100 in 2007 before rising 1.7 percent next year.  The median new-home price will probably fall 2.3 percent to $240,800 this year, and then grow by 2.6 percent in 2008.

Unfortunately, the Realtor group remains a spin organization, unable to release information without sugarcoating it. Their headline is the reality-challenged "Home Sales Projected to Fluctuate Narrowly With a Gradual Upturn."

Further, they somehow omitted the simple fact that, even by their own too cheery data, Existing-home sales are forecast to drop 4.6% (they provided the data, but refused to do the math). And the group still has failed to acknowledge the extent of the overbuilding and inventory problems, insisting “We continue to experience a temporary distortion in comparing median existing-home prices.”

Um, no. It's a major correction after an enormous run up due to free money. And as mortgage rates tick higher, that 30% correction (first mentioned here) is looking more and more possible.

Regardless, Investech's Jim Stack has disabused the group of its forecasting accuracy. In a June 1st commentary, Stack looked at his   Housing Bellwether chart, and plotted some of the more outrageous/egregious comments from former NAR Chief Economist:
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click for larger graphic

Housing_bellwether

Chart courtesy of Investech Research

By being such dishonest brokers of information, the NAR has now made themselves look ridiculous. No one knows what the future will bring, but consistently absurd spin offered up by the Realtor group not only does a disservice to the public, but is now working against the interest of Realtors themselves.

My advice to them: Stop the crap, and try a little honesty.

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Sources:
Home Sales Projected to Fluctuate Narrowly With a Gradual Upturn
June 06, 2007
http://www.realtor.org/press_room/news_releases/2007/home_sales_projected_to_fluctuate.html

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