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Realtors see sunnier 2010

Posted by Scott Van Voorhis  November 16, 2009 09:00 AM

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OK, here’s one that is sure to get all the housing bears out there feeling downright surly again.

The National Association of Realtors is forecasting that prices will rise 4 percent in 2010 after hitting bottom in 2009.
Home sales will also rise by 700,000 to 5.7 million, he argued.

Lawrence Yun, the association’s chief economist, made the sure- to- be-controversial predictions to the faithful assembled at NAR’s annual convention in San Diego last week.

He also noted foreclosures will top out in the first half of next year and the “fear factor’’ of falling prices that has put such a damper on the market will fade.

I guess you have to hand it to Yun, if nothing else, he’s not afraid to stick his head out there.

Still, given some of notoriety the real estate trade group earned for some of its predictions during the bubble years, this is risky territory.

Yun points to a pair of stats to back up his sunny forecast.

Intervention by the federal government through the home buyer tax credit has stabilized the market. Meanwhile, a two-year high in home resales in September shows buyers are eager to get back into the market, NAR’s economist contends.

You don’t have to be a doom-and-gloomer awaiting the final of the market next year to be cautious about Yun’s prognostications.

The economy is key here, and the jobless situation, if anything, looks like it is going to be worse than predicted.

We may well be headed for 11 percent unemployment or higher – that will surely keep a lid on demand while keeping foreclosures rolling along.

There’s also a powerful counterargument to the tax credit, that it is essentially feeding demand today by borrowing from future sales. Basically, we are getting people who would have bought anyway to speed up their decision by six months or a year.

Anyway, there’s a lot here for housing bears to rip into.


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20 comments so far...
  1. Very few bears take what the NAR says for anything more than what it is, a pro-real estate view perpetuated by a group with a vested interest in seeing home prices rise.

    Remember when David Lereah was preaching the same thing and then after he resigned from the NAR came out and said he was basically lying the entire time? Do you think maybe Yun has the same motive?

    People keep saying that we need an improvement in real estate to pull us out of this recession. This is nonsense. The consumer played a huge roll in getting us into this recession (by taking on huge debt loads to buy overpriced homes and a bunch of imported junk they didn't need) so the consumer is not going to get us out of this recession. The only thing that will get us out of this recession is for debt to be purged (either through repayment or default); massive leverage to be unwound; savings to increase; and for the US manufacturing base to be rebuilt.

    Everything the government and FED are doing with their "solutions" is preventing these very things from occurring. The only outcome of all the stimulus, bailouts and trillions of dollars being createdd out of thin air is a (hyper)inflationary "recovery" with the mother of all crashes at some point in the future.

    Posted by Steve November 16, 09 09:32 AM
  1. Anyone want to take bets on whether the NAR stands by this forecast come April, when the credit expires?

    At this point, the NAR has eroded its credibility so much that I'd actually be LESS likely to use a particular real estate agent if I knew he or she was a Realtor. Once upon a time, the Realtor badge stood for trustworthiness and sound advice, now it simply stands for short-sighted me-first salesmanship with little regard for market realities or the welfare of the customer.

    Posted by James November 16, 09 10:07 AM
  1. I rarely pay attention to predictions from the NAR. Every year the same garbage: the worst is behind us, prices are stabilizing, now is a great time to buy or sell a home, blah blah blah.... It's like listening to a broken record.

    The fact is, the NAR's track record for making accurate market calls is appallingly bad. They have been DEAD WRONG for the past 5 years. This year will be no different. Prices are still headed lower.

    Posted by Lance Stapleton November 16, 09 10:15 AM
  1. I am a Realtor and a very Liberal person and I find it unconscionable that an Industry Lobbying Group, the NAR, which is not regulated by the government, makes these irresponsible future projections and that our watch dog media, who should be looking out for us, picks it up and runs with the story. I can dimly realize that it is Scott’s intention to draw readers to this blog and to report on both the good, bad or questionable news, but I would welcome a great deal more skepticism when reporting these NAR press announcements, rather than just throwing it over the fence.

    Many people are basing the largest purchase in their adult lives on our media reporting the facts and press releases such as this one are not facts. Hope is not a fact and buyers or sellers of homes can not take future projections by a Lobbying Group to the bank. How many people bought homes during the boom years, 2003 to 2006 based upon the NAR making future price increase projections and are now underwater and in a great deal of financial trouble if they need to sell a relatively illiquid asset with a 5% or 6% commission and other assorted fees on top of it? Doesn’t anyone remember the NAR Chief Economist during the housing boom, David Lereah, and his book, “Why the Real Estate Boom Will Not Bust”. The NAR should be regulated by the Securities and Exchange Commission, just as the Stock Market is. Then maybe the public would take us more seriously and not look upon us as nothing more than commission only salespeople looking out for our own best interests.

    The media would be very skeptical if and when a Corporate 500 company, which has had a poor track record misstating future earnings, kept reporting projections which were then not attained. The press and the SEC would be all over them, their Board would be sued and maybe put in jail and the stock delisted. The NAR and my fellow Realtors want it both ways. We want to throw out a sunny projection to get people to buy homes and when these projections fall short, we revise the numbers to make the percentage decline appear smaller than originally forecasted. We are playing with people’s lives and this is a very serious matter.
    AgentWest

    Posted by AgentWest November 16, 09 11:12 AM
  1. "There’s also a powerful counterargument to the tax credit, that it is essentially feeding demand today by borrowing from future sales. Basically, we are getting people who would have bought anyway to speed up their decision by six months or a year."

    Any data to suggest that this is true? Or conversely that the tax credit boost was from pent up demand during the boom years?

    The NAR will certainly be wrong, BTW. Also the housing bears will certainly be wrong. Truth is always in the middle...

    Posted by just_curious November 16, 09 12:12 PM
  1. Wanted to post an off topic, but related observation I've made over the last few weeks: the traffic at shopping malls has been very low recently, especially given that Christmas is only 6 weeks away. I'm primarily basing this on the traffic at Legacy Place and the surrounding shopping centers in Dedham (which I drive around on a regular basis), although I also observed a noticeable decrease in traffic in Natick (Shoppers World and Natick Collection) recently.

    Anyone else notice this? Could this be a sign that the recession is "finally" hitting the consumer?

    If this is a trend, it obviously does not bode well for the real estate market. Would be consistent with the recent survey that showed only 5% of Americans plan to buy a home in the next year.

    Posted by Lou November 16, 09 12:26 PM
  1. Any data to suggest that this is true?

    Yes. Look at the tiered Case-Shiller index for Boston.

    Or conversely that the tax credit boost was from pent up demand during the boom years?

    The home ownership rate is still higher than the historical average, including among younger age groups (potential first time buyers). For "pent up demand" to be anything but wishful thinking, I would expect the home ownership rate to be below average.

    The NAR will certainly be wrong, BTW. Also the housing bears will certainly be wrong. Truth is always in the middle...

    That's a grossly oversimplistic generalization. Housing bears have not issued a uniform forecast (like The NAR). It isn't a single prediction on the opposite end of the spectrum from The NAR. I would image that at least some housing bears are actually being too optimistic. Yes, those with the most dire predictions are likely to be wrong, but there are plenty of other of bear-occupied spaces on the spectrum.

    Posted by Dave November 16, 09 12:43 PM
  1. How often has NAR been right in the last 5 years? And how often have the bears been wrong in the same period?

    As always, I've been posting on this blog for years. I'm happy to have any posts I've made over that time compared to what happened... Pretty sure that's not precisely true of the bulls.

    Posted by charles November 16, 09 12:44 PM
  1. I just finished reading Elizabeth Warren's book The Two-Income Trap. I think readers of this blog would find it thought provoking. She's a pretty thorough anthropologist of the current situation, and the role that housing policy and lending policy have played in creating it.

    Posted by Susan November 16, 09 01:03 PM
  1. The media would be very skeptical if and when a Corporate 500 company, which has had a poor track record misstating future earnings, kept reporting projections which were then not attained.

    Good for you. NAR's humiliating record is easy to find on the blogs. Paper Economy used to keep a nice running list of each of NAR's hilariously inaccurate predictions, side-by-side with the actual numbers. This is the kind of information that the media should be reporting to give readers some context, but never do. The real estate press is directly dependent on real estate advertising dollars, and the industry does scream when coverage is unfavorable.

    Truth is always in the middle...

    Of course it isn't. What a silly thing to say.

    Posted by Marcus November 16, 09 02:19 PM
  1. "I guess you have to hand it to Yun, if nothing else, he’s not afraid to stick his head out there."

    No offense but how is a man who already has zero credibility, sticking his neck out there?. For the umpteenth time, why does the media even ask these clowns about the housing market?

    Posted by Hung Wang November 16, 09 03:19 PM
  1. "Any data to suggest that this is true? Or conversely that the tax credit boost was from pent up demand during the boom years?"

    People have said that the home buyer tax credit generated around 350,000 sales solely as a result of the credit. Whether the numbers are valid is debatable, but the economic premise of bringing demand forward is not. Case in point, auto sales volume collapsed some 33% the month after cash for clunkers expired.

    The whole premise of the real estate bubble was to bring demand forward via low interest rates, lax lending standards and a massive explosion in credit. Not only did it bring demand forward, but it generated demand from people that were probably life long renters (say because they could never afford a home). And to take a step back even further, the Great Credit Expansion which began in the early 1980's, was a giant experiment in bringing demand forward over the last 2.5 decades. It is this experiment, which really took hold in the early/mid 2000's, that has blown up over the last 2 years.

    Posted by John November 16, 09 04:21 PM
  1. "Of course it isn't. What a silly thing to say."

    Of course it is. What a silly thing to say.

    In just about everything that matters, truth lies between the extremes. This is nearly always true and certainly not silly. I take the NAR to be one extreme, and clearly some of the authors on this blog are at the other extreme or beyond. I didn't say the exact MIDDLE!!!!

    Posted by just_curious November 16, 09 04:53 PM
  1. Agent West, good for you! I expect you're as forthcoming with potential clients, and I applaud you for it.

    I urge you to make your voice heard. Tell other Realtors that the proclamations of the NAR is damaging your long-term brand value for the sake of short-term gains, and you're not going to stand for it.

    If that fails, why bother being a Realtor? Why give money to such an organization?

    Posted by James November 16, 09 09:07 PM
  1. I take the NAR to be one extreme, and clearly some of the authors on this blog are at the other extreme or beyond.

    I think you haven't read much on the internet if you think some of the authors on this blog represent an extreme. Even so, to equate all of the bears on this blog with the most pessimistic of the bunch is fallacious. While the truth might light in between the optimistic and pessimistic extremes, it is just wrong to imply that all bears are at the pessimistic extreme.

    Posted by Dave November 16, 09 10:24 PM
  1. just_curious, now you're just defending a meaningless statement with wordplay.

    Since the market's peak four years ago, NAR's projections have not represented "one extreme" with the truth somewhere "in between." They have just been flat-out wrong--in absolute terms, in magnitude and often, even in direction. More than that, David Leareah essentially admitted they were lies, complaining he was forced to tell them.

    Appealing to the magical Centrist Fairy to waive her wand and make the truth "in between" two positions that you deem "extreme" without evaluating them is just intellectual laziness, a desire to appear wise and above it all without bothering to weigh the facts and arguments or do any actual work.

    Is the truth "somewhere in between" the germ theory of disease and and an imbalance of humours? In between the "extreme positions" of Galileo and the Pope?

    Posted by Marcus November 17, 09 12:27 PM
  1. Marcus, the truth does lie in between the "extreme positions" of Galileo and the Pope. Galileo said the earth revolves around the sun, the Pope said the sun revolves around the earth, and Newton figured out that they both revolve around their common center of mass, roughly 0.0001% of the way from the center of the sun to the center of the earth.

    Which goes to show, even when the truth lies somewhere in the middle, one person can be a million times closer to the right answer.

    Posted by James November 17, 09 04:45 PM
  1. #9 I haven't read the book, but the simple answer to the two-income trap is inflation. It was the massive monetary and credit expansion that caused the rapid rise in home prices, health care, tuition, etc. while incomes lagged.

    Posted by Bobby November 17, 09 05:19 PM
  1. Point taken, James. But actually, the Pope thought the entire universe revolved around the earth, so you are still giving him too much credit.

    Posted by Marcus November 17, 09 07:55 PM
  1. I'm late to the bear party here, but I'll just quote Meredith Whitney and ask how Yun expects the market to bounce back after the Fed stops its program to buy MBS and the expensive Congressional subsidy to home buyers expires.

    Whitney:

    "Stocks are overvalued and the US economy is likely to fall back into a recession … disappointed that Fed Chairman Ben Bernanke didn't spell out how the Federal Reserve planned to exit "the biggest Fed program to date, which is the mortgage-backed purchase program." … US consumer was going through the biggest credit contraction ever—even bigger than that during the Great Depression. That credit contraction is accelerating. There's nowhere to hide at this point. … banking sector is not adequately capitalized and will need to raise more capital in the coming year. … residential real estate market is likely to worsen and remains a much bigger threat than the commercial property market. The government's mortgage modification program won't result in any major improvement in homeowners' ability to stay above water. … I don't know what's going on in the market right now because it makes no sense to me. … The scariest thing about the Fed's program is that the money on the sidelines isn't going to support that asset class. So the trillion dollars of Fannie (Mae), Freddie (Mac) and mortgage-backed securities that the Fed is holding—there's no substitute buyer there." [www.cnbc.com/id/33972133]

    That covers it.

    Yun has no choice but to make sunny prognostications, whatever the reality. That's his job—if he doesn't try to spin up the market, the NAR will can him. Yun need only to spin without being spectacularly and hilariously wrong—if he becomes a joke like his predecessor Lereah, he'll also get canned.

    The culprit here isn't Yun, or even NAR for hiring smiling spinmeisters, but the Fed and Congress for creating a false sense of security for people to go into debt to buy homes that will surely fall in value after expensive government subsidies have necessarily expired and noting is left to prop up the market.

    Posted by Sunny Jim November 18, 09 11:35 AM
 
About boston real estate now
Scott Van Voorhis is a freelance writer who specializes in real estate and business issues.

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