I thought as we are winding up 2006, it would be interesting to check the forecasting ability of real estate’s favorite prognosticator, David Lereah, chief economist of the National Association of Realtors (NAR).  We do have a bit of an advantage, since we’ve got that 20/20 hindsight.  Here’s what this year’s national home sales (seasonally adjusted) looked like: [data from NAR]

Every month the NAR issues a press release with the previous month’s sales report.  In this report Lereah gives a sort of a "state of the market" address.  Here for your reading pleasure and RE enlightenment are his comments collected from the past year: [And blatant editorializing by yours truly]

  • January 2006- The level of home sales activity is now at a sustainable level, and is likely to pick up a bit in the months ahead. [easy call- you expect a seasonal increase after Jan]
  • February 2006- In the wake of interest rates peaking in November, I expect we are in a bit of a trough that may be followed by a modest rise and then a general plateau in the level of sales activity.  Existing-home sales should stay below the record levels experienced over the last two years, but they’ll maintain a historically high pace. [sales do approximate 2003 levels- sales are insufficient to keep pace with inventory though, resulting in lowering prices.]
  • March 2006- Higher interest rates had been tapping the breaks [sic], notably in higher-cost housing markets since mortgage interest rates trended up last fall, but we’re seeing signs of stabilization in the market now with the sales rebound.  Home sales should level-out in the months ahead. [You can't win them all.]
  • April 2006- This is additional evidence that we’re experiencing a soft landing. We may see some minor slowing in home sales as interest rates rise, but the market clearly is stabilizing. [more stabilization]
     
  • May 2006- Higher interest rates are slowing home sales, but we see this as another sign of a soft landing for the housing sector which remains at historically high levels.
  • June 2006- Although mortgage interest rates remain historically low, the uptrend in interest rates this year is affecting those buyers who are at the margins of affordability. [and those margins have become rather thick, lack of affordability is sited as a factor by buyers across the board]
  • July 2006-Over the last three months home sales have held in a narrow range, easing to a level that is near our annual projection, which tells us the market is stabilizing. [The market is now stabilizing for the third time this year- that's pretty stable!]
     
  • August 2006- Now sellers in many areas of the country are pricing to reflect current market realities.  As a result, there could be some lift to home sales, [Hope springs eternal.] but it’s likely to take some months for price appreciation to rise." [He doesn't say how many months it will take, but four months later, it hasn't happened yet.]
     
  • September 2006- After a stronger-than-expected drop in July, the fairly even sales numbers in August tell us the market is at a more sustainable pace.  [Are we stabilizing again?] It keeps us on track to see the third highest sales year on record, but we do expect an adjustment in home prices to last several months as we work through a build up in the inventory of homes on the market." [All that inventory gone in a few months? Sure, that will happen.]
     
  • October 2006- "Considering that existing-home sales are based on closed transactions, this is a lagging indicator and the worst is behind us as far as a market correction- this is likely the trough for sales.  When consumers recognize that home sales are stabilizing, we’ll see the buyers who’ve been on the sidelines get back into the market, and sales will be at more normal levels in the wake of the unsustainable boom that we saw last year."
  • November 2006- The present level of home sales demonstrates some confidence in the market, but sales are lower than sustainable [I think that means they can't stay this bad.] due to psychological factors.  The demographics of our growing population, historically low and declining mortgage interest rates, and healthy job creation mean the wherewithal is there to buy homes in most of the country, but many buyers remain on the sidelines.  After a period of price adjustment, we’ll see more confidence in the market and a lift to home sales should be apparent in the first quarter of 2007." [again, an easy call]
  • December 2006- As the housing market recovers from its correction existing home sales should be rising gradually during 2007- it looks like we may have reached the low point for the current cycle in September.  We’ve entered a more sustainable period of home sales now, and we expect greater support for prices over time as inventory levels are eventually drawn down. [Gee- there was only a negligible uptick from October to November, but that appears to be a more sustainable level.  In September it was going to take a few months to work through the inventory, that has been revised to "eventually."]