I almost miss David Lereah. He was the former chief economist for
the National Association of Realtors (NAR), and author of many fabulous books on how to lose all your money in Real Estate (as well as Tech/Telecom/Internet stocks). Since Housing peaked in
August 2005, we could always count on Lereah for some utterly ridiculous economic absurdity, explaining why the Housing numbers really weren’t
that bad, and why the-bottom-was-in !
Sheer, delightful idiocy.
It was great theater. Each month the NAR could be counted on for denial, cheerleading, and blind stupidity. When the NAR ended
up with a new, somewhat less-hallucinogenic chief economist, I was actually a
Well, cheer up kids! At least a little of the ole psilocybin may be back in the NAR drinking water. This month, they served up the following delightful headline:
And ya know, these problems ARE "temporary." Thanks to the entropy of the universe, eventually all real estate will disappear as the universe eventually succumbs to its own mortality (heat death). So if you want to be technical about it, all problems are temporary. Thank you, Lawrence Yun, for that bit of existential insight.
Where was I? Oh, yes, real estate.
What did this month’s NAR report have to say?
• Mortgage availability problems peaked in August (How they know this, I cannot say. But if they said it, well, there’s a chance its true: A very, very small chance).
• There were unusual disruptions in the mortgage market. (Really? I must have issed ’em)
• We saw a fairly high number of postponed or cancelled sales. (I guess this must be a fairly new phenomena)
• Lower sales contributed to a buildup of unsold inventory. (duh)
• The NAR expects similar results for home sales in September.
Sow while the NAR cannot help themselves but spin the data somewhat — a flack is a flack is a flack — they are no where near Baghdad Bob’s levels.
Of course, most sober commentators who reviewed the data were much more circumspect. Our own response to this week’s utterly dreadful Housing
datapoints were of that ilk:
But to really get a sense of how poor the data was, check out what Floyd Norris wrote in the NYT today:
"With sales of both new and existing homes down, more homes are now on the market than ever before — almost 4.5 million, a figure that is nearly double the number in early 2005, when prices were rising and home builders were reporting high profits.
And many of those homes have been on the market for a while. Of the 178,000 completed new homes that were available for sale at the end of July, fewer than 15 percent found buyers in August. That was the lowest rate in more than a decade.
In late 2006, it appeared that the housing market had stabilized after falling, with new homes selling at a seasonally adjusted annual rate of about one million, and investors bid up the price of home builder stocks.
But with all the bad news, those prices have fallen to new lows. The pace of new-home sales in August was just 795,000, a seven-year low."
But the money shot is the accompanying graphic:
graphic courtesy of the NYT
By late 2008, or even 2009, we should Housing more "normalized. But between now and then, we should expect to see prices drop more, until much of the huge inventory build gets worked off. For those of you who put more faith into futures markets than I do, note that prices aren’t shown bottoming until 2010.
Temporary? I guess if your definition of temporary is a few years, well then yeah — its temporary. But so is everything else . . .
August Existing-Home Sales Fall on Temporary Mortgage Problems
NAR September 25, 2007
For Housing, the Summer of the Unsold
NYT, September 29, 2007