It didn’t take a crystal ball to know that November sales would be down, prices would be down, and that the National Association of Realtors (NAR) would try and spin the problems away. According to Bloomberg:
“It appears we’ve hit bottom,” David Lereah, chief economist of the Realtors’ group, said at a briefing in Washington. “The price drops are necessary to stir sales. It is working.”
While sales were up a negligible 0.6% last month, the NAR has long said that the more important number is year-over-year, as the month-over-month does not allow for seasonal variability. It’s a recommendation they have managed to forget the last few months, as the month-over-month doesn’t look as bad. Year-over-year, sales were DOWN 10.7%. Remember that last year’s sales were already lackluster, as the market had begun to cool.
As for the median price:
The median price of an existing home fell 3.1 percent in November from a year ago to $218,000, the fourth consecutive monthly decline, Lereah said.
Here’s what the appreciation trend looks like: [data from NAR]
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Resellers, like homebuilders, are also offering incentives and kickbacks. It is very likely that the median price is, in fact, overstated.
While November’s appreciation of -3.2% is a slight improvement from October’s -3.58% it can hardly significant enough to be a sign that prices have bottomed out. Last month’s year-over- year sales decline was 11.5%. Again, a slight improvement, but hardly conclusive evidence of a bottom.
Sales typically decline on a seasonal basis for the December-January period. It would be expected that the market would see a deterioration in both sales and prices for the next couple of months. Typically sales improve in the spring. The unknown factor for 2007 is the level of inventory, and how much downward pressue inventory levels will continue to exert on prices.
Lereah is stating “We’ve hit bottom” as a matter of fact, which is the same thing as saying “Prices cannot go lower.” What’s to keep a new home buyer from suing him when their property value drops, if they buy their homes with assistance from a REALTOR(R)?
Seamusfurr-
Reuters is quoting Lereah as saying the “housing contraction” has bottomed. Bloomberg is quoting him as saying “we’ve hit bottom.” The NAR press release states:
Note he didn’t say “prices” have hit bottom. WE have, or the CONTRACTION has, but not PRICES.
His prediction is rather disingenious. I also expect a gradual rise in sales in 2007- that happens on a seasonal basis. What drives prices though is the BALANCE of inventory/sales, not sales numbers alone. I expect inventory increases to outpace sales in 2007, dampening prices further. Lereah may believe the same thing- he calls for “greater support for prices over time.” Well gee, so do I- the question is how long “over time” is, and how far prices fall before we see “price support.”
I expect more lawsuits to fly as we trend downward, but Lereah’s statements are pretty fuzzy- it would be tough to nail him to a wall.
“It appears we’ve hit bottom,’’ David Lereah, chief economist of the Realtors’ group, said at a briefing in Washington.
Wishful thinking or just simple, delusional denial?
I can’t decide.
Have you ever read Lereah’s bio?
He has to be a smart man.
Lereah has access to better data than I have. I couldn’t spin a recovery out of this with a straight face. He’s got to be lying- he can’t be that stupid.
<tinfoilhat>
Maybe the Realtors and MSM are consciously pushing on the pendulum. They first make a big hairy deal about a “bottom” at the low point of the traditional seasonal activity. Then they spin like mad when the unadjusted numbers (presumably) look better as the more active season starts.
Given how seriously they take buyer psychology, perhaps they think this can become a self-fulfilling prophecy even against logic and fundamentals. After all, there must be 5,000 people reading Martin Crutsinger’s AP story (it was even on p. 17 of my humble Halifax Daily News) for everyone who visited Doom today.
</tinfoilhat>
I think you’ve hit it on the head, John M., and I don’t consider it a tinfoil-hat theory.
What we’re seeing right now is a battle for the hearts and minds of potential buyers. Yes, buyer confidence is always a key component of the economy-at-large, but right now things seem to be at a once-in-a-decade tipping point, psychology-wise.
The NAR and Co. realize that perception is everything at the moment, even though the numbers don’t support a “stabilization” or “recovery” or (for all anyone knows) a “bottom.” But their cleverly spun reports aren’t aimed at us Doomers, who can see through the bogus numbers (with the help of Twist and others smarter than I). The NAR is hoping against hope that it can shape the psychological outlook of the general populace as it relates to the housing market.
That’s an ongoing battle, and it’s why the NAR is suddenly trumpting monthly buying numbers, not year over year. Because if they put those ugly numbers into the MSM, the psychological effects would be awful (for the NAR, that is).
As I posted last week, we’re seeing a full-court press by the REIC at the moment because it is hoping to lay the groundwork for a big spring “buying season.” They know they need public perception on their side heading into 2Q 2007, because if they don’t make some major headway then, the whole year is likely to suck.
So, as you said, it’s not beyond Lereah and Co. to declare a (false) bottom during the dead buying season, then jump all over the numbers when seasonal sales pick up a little. That way they can say, “See, we told you it was a bottom. C’mon back, buyers, before it’s too late.”
But, as I said last week, one thing they can’t really control is inventory. And when everyone puts their home back on the market in March or April and inventory climbs to all-time highs, they won’t be able to “psychology” their way out of that mess, methinks.
Judge-
You should have seen me yesterday writing this post. I had Bloomberg on as they interviewed “expert” after “expert,” who pretty much conceded after two days of “good news” that housing was now in recovery. Now mind you, that makes it a great time to buy whatever stock or commodity it is they happen to be pushing. Mr. Twist was laughing as I grumbled at the “experts” and typed furiously.
I had a ten o’clock appt. that I moved back to eleven because I wanted to get the graph up. I doubt it will break the back of the REIC, but a couple of thousand people saw what the numbers really look like. This morning the graph is headlining over at HousingPanic- maybe if it gets passed around enough- we can provide some balance to the spin.
Dr. Chuck Missler (Biblical teacher from khouse.org) made a comment that I really liked.
He’s from an Info Tech background, and he said an old IT phrase is:
“If you torture the data long enough, it will confess to anything.”
Sounds like the NAR specifically and the REIC in general have already heard (and fully adopted) that philosophy.
Happy New Year everyone!!