The National Association of Realtors' Wacky Predictions
Published 9/20/07 (Modified 3/8/11)
I am currently not a home owner, but just a few months ago I wanted to be one. But now with the housing bubble pop in full swing, I've decided to hold off on my original plans until the housing environment improved. The bubble correction is still rippling through the real estate market, and the effects from the mortgage and credit crisis are likely to last for a while.
The Funniest Prognosticator Of Them All
I have been following the real estate market for some time and try to track the various projections out there. Of all of the market opinions that I follow, there's none funnier than the regularly issued opinion releases by the National Association of Realtors (NAR), the largest trade group in North America representing real estate agents.
Prior to and during the recent downturn of the housing market, NAR was represented by their chief economist David Lereah, who served as the association's spokesman and cheerleader on forecasts and trends affecting the U.S. real estate market. He has been frequently criticized by many for his perpetually rosy and outlandish spins on the state of the housing market, and has even been accused of encouraging the rise of the real estate bubble. He finally stepped down from his position earlier this year and was replaced by the new chief economist Lawrence Yun.
I've always found NAR's opinions to be very entertaining. As the real estate ship Titanic slowly sank, you could be sure the NAR's chief spokesman was busy running the decks proclaiming how wonderful of a day it was and how nobody had anything to fear because the ship was running just fine. Before the pop, Lereah was busy calling bubble believers "Chicken Littles," while trying to keep the hype going. The image and message displayed at the top right of this blog entry was even part of NAR's $40 million "It's A Great Time To Buy Or Sell A Home" advertising blitz campaign that started on November 2006, advising consumers to take buying or selling action now while conditions remained favorable. Such eternal optimists.
As CBS Marketwatch bluntly pointed out:
There are two universal truths at the National Association of Realtors: 1) It's always a good time to buy or sell a home; and 2) We've seen the worst of the housing market correction.
Just for kicks, let's take a look at the National Association of Realtors' predictions and compare them to what actually happened:
December 2005 - NAR predicted the national median home price would rise about 6.1% in 2006. Over a full year, it "has never declined since good record keeping began in 1968," NAR boldly stated.
- The Reality: Through October 2006, the median price of residential properties was down 3.5% from a year earlier. The median price decline is even worse if you take into account all the extra cash and financing incentives that were thrown on new home buyers.
January 2006 - David Lereah's forecast: The market is in the process of normalization and "The level of home sales activity is now at a sustainable level, and is likely to pick up a bit in the months ahead.
- The Reality: Fourth quarter sales fell at an annual rate of 12.6% to 6.94 million annualized.
April 2006 - NAR's forecast: Home sales will move up and down somewhat over the remainder of the year but stay at a high plateau.
- The Reality: First quarter sales fell at an annual rate of 8.6% to 6.79 million. Lereah's explanation: This is additional evidence that we're experiencing a soft landing.
July 2006 - NAR's forecast: The market should even out just below present levels.
- The Reality: Second quarter sales fell at an annual rate of 6% to 6.69 million. Lereah's explanation: The market is stabilizing.
October 2006 - NAR's forecast: We expect sales activity to pick up early next year.
- The Reality: Third quarter sales fell at an annual rate of 22.2% to 6.28 million. Lereah's explanation: This is likely the trough in sales.
January 2007 - Lereah announced: "After reaching what appears to be the bottom in the fourth quarter of 2006, we expect existing home sales to gradually rise all this year and well into 2008"
- The Reality: Fourth quarter sales fell at an annual rate of 2.3% to 6.24 million. Lereah's explanation: It appears we have established a bottom.
September 2007 - NAR's new chief economist Lawrence Yun confidently proclaimed: "Mortgage disruptions will hold back sales over the short term, but long term fundamentals are favorable. A modest upturn is projected for existing home sales toward the end of the year, with broader improvement to include the new home market by the middle of 2008."
Let the games begin. :)