There’s always something to howl about.

The National Association of Realtors is Simply Outrageous

This title truly comes from the heart. Reading the Wall Street Journal today, I stumbled across the latest report from the lead economist at the National Association of Realtors. In the face of overwhelming negative information and despite their own lowered forecasts, Mr. Lawrence Yun states,

Existing-home sales should be relatively stable over the next few months, holding in a modest range, with some pent-up demand growing from buyers who’ve been on the sidelines.” He continues on to say, “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

Perhaps he considers the third time he tries to shovel this to the markets will be the charm. I am not sure what it takes to be an economist, let alone head of economic research at the National Association of Realtors, but the first interview question must be “Do you have a pair of unbreakable, impenetrable, gigantic Rose Colored glasses?”

Before I move forward, I want to say that I understand that there are many different economic philosophies out there. From Regan’s supply side economics to our own Jeff Brown’s interesting economic theories, there can be many ways to interpret various economic indicators. Instead of spouting my own point of view, I will layout simple economic trends and let you the reader be the judge of where you think the market will go.

The Current Market Climate:

  • The Subprime mortgage market has been shut down, shutting out at least 10% (probably more) of the buying market
  • Alt-A (Loans below prime, but above subprime) mortgages have taken a huge hit, shutting out another indeterminate amount of buyers (~2-5%)
  • Fed chose to hold interest rates steady, resulting in higher expected mortgage rates
  • Adjustable rate mortgage resets hit many consumers in their wallet very hard
  • Time on the market has increased significantly for most markets and overall
  • Defaults have been climbing and have showed no signs of slowing. Additionally, defaults significantly lower market values, resulting in lower selling prices
  • Leverage finance troubles in the broader economy will have an effect on real estate prices
  • Economic growth has been strong, but investors fear the debt market and businesses might be hurt. This is evident in the recent volatility in the stock markets
  • For the first time in 60 years, the broad residential real estate market is expecting a year over year decline in prices
  • Major homebuilders are reporting significant drops in revenue and net income
  • Mortgage REITs and Mortgage companies are going out of business
  • No one (aside from the NAR economist) is project any kind of recovery on the debt side until the end of the year or later

Clear all that up in five months? You, the reader, be the judge of when you expect a recovery.