A big hat tip to "Tobby" for letting us in on the National Association of Realtors [NAR] latest propaganda, I mean "promotional campaign." You can see all of the full-size print ads here, but I thought I’d share some of my personal favorites: [Text will be displayed below the ads [blue comments are mine] - in deference to Doomers with older computers, I never have images wider than 600 pixels.]
You might be wondering if buying a home right now is a smart financial decision. [No, I wasn't] The fact is, homeownership is key to building longterm wealth, no matter when someone buys. [Tell that to all the poor souls who bought at the top of the market a couple of years ago and are now facing foreclosure.] Studies show that, over time, most homeowners will steadily build equity. [That's no guarantee that you will, however.] For example, during the past three decades, home values have increased on average more than 6% per year.
Of course, owning a home is much more than a way to gain a financial edge. It’s also where you raise a family and create lifelong memorites. [Renters only get short term memories, I guess.] Work with a REALTOR, a member of the National Association of REALTORS, they can show you options in your area that best fit your situation. [Although there are those agents who will show you properties that will maximize their profits, but not necessarily yours.]
I beg to differ with the NAR- like most investments, timing is everything. Let’s look at a graph from economist Robert Shiller’s book "Irrational Exuberance" and look at that "average 6%/year appreciation":
All of a sudden that "average of more than 6% appreciation over the last three decades" looks like cherry picking, doesn’t it?
Research proves that for most people who own homes for longer periods of time will build equity. [That's what happens when you pay off a mortgage] For example, during the past three decades, home values have increased an average of more than 6.0% per year. [This isn't good statistics, but you have to give them points for "Fun with Numbers"]
Of course, a home is much more than a way to build long-term wealth, it’s also where you enjoy your lifestyle and create memories with your loved ones. [I guess those of us who live in rentals can't enjoy lifestyles or create memories. Renting causes amnesia?] Work with a REALTOR, a member of the National Association of REALTORS, they can show you options in your area that best fit your situation. If you’ve been waiting for the right time to buy a home, you should know the facts about homeownership. To learn more, visit HousingMarketfacts.com.
For that whole "home doubling every 10 years" thing, see above appreciation chart. Oh, and if you prefer your ads in Spanish, the NAR has the same ad with a more Hispanic looking agent photoshopped in:
If you’re thinking about selling your home, but you’re unsure of the timing, there are some things your REALTOR wants you to know. Today’s current real estate market conditions– low rates and an abundant inventory– are offering buyers once-in-a-lifetime opportunities. [Why do you care about buyers "once-in-a-lifetime opportunites"- you're the seller.] Which means there will be more buyers in the market looking for a home like yours. [Excuse me, but "abundant inventory" is a result of fewer buyers, not more.]
Question: If realtors knew the market would change, how come their chief economists didn’t know?
If there’s some subliminal message in here that’s supposed to put you in the mood to buy, it’s not working on me. [The overt message isn't working either.] Go ahead, read through the materials on the Realtor site- but make sure that you’re not eating, or someone is around who knows the Heimlich Maneuver. You are liable to find the materials a bit much.
Freaking idiots one and all both Realtors and anyone who buys.
OT KB homes just announced a 9.99 4Q writedown
NAR doesn’t have enough money to fix this with an ad campaign.
The latest chalkboard opening on the Simpson’s
“Teacher did not pay too much for her condo”
Now if South Park does a special on realtors.. That’ll be the end….
Imagine everything in South Park driving Escalades but losing their homes…..
longweaver, that would be the funniest thiing ever.
do they really think a few print ads will turn this thing around? anti-spam word: stupid
Well, lookie-lookie! My anti-spam word is “pauper.” Must be how a lot of those commission-less Real-a-tors are feeling these days. Hope their 2008 propaganda effort works .
as if we didnt have enough evidence that most realtors are know-nothing simpletons with no economic sense…
“Renters only get short term memories, I guess”.
Who are these children in my house? Why are they calling me dad? Where did all this disposable income come from?
Just like the old SNL skit with Tom Hanks where he only has short term memory and cant remember anything after five minutes.
Funny – when other investment sellers pitch their offerings, they have to make all kinds of disclaimers regarding the fact that past performance is not a guarantee of future returns, etc.
Why don’t the scummiest and least honest of all salesmen, Realtors, have to abide by similar rules?
After all, here, they’re clearly pitching the house as a financial investment, talking about rates of return, etc. – I don’t see why they should be less restricted than other investment salespeople, and in fact, given the relatively lower sophistication of a home buyer versus the average stock buyer, I would think the regulation on representations by home salesmen should be more rigorous, not less…
I suspect this will get wider coverage.
http://www.bloomberg.com/apps/news?pid=20601103&sid=aAmZ97rqFX8Y&refer=news
This should get wider coverage as well, but not from this source!
The Big Betrayal
No Jobs for the New Economy (or the Old)
How are low paying jobs as waitresses, bartenders, and bed pan changers going to get you that dream house shown in these ads?
http://www.counterpunch.org/roberts01082008.html
twist,
you should post this article. It shows that back in 2003 we already were having Congressional meetings abouts ARMs being overused & economists were already warning of a bubble.
& yet, NAR still wants to believe that a turn-around is just a year away…
http://www.chicagotribune.com/business/yourmoney/chi-mon_qtr_gail_0107jan07,1,3923343,full.column?ctrack=2&cset=true
While not forecasting problems specifically for banks, Merrill Lynch economist David Rosenberg was among the economists sounding the early warnings. In September 2004, he said there was a clear housing bubble, and it could turn ugly.
In particular, he raised concerns about consumers overindulging in adjustable-rate mortgages, the loans that a few years later would cause a surge in defaults and undermine the value of the bonds Wall Street created.
When Rosenberg wrote his report, home prices in such markets as San Diego and Los Angeles already had climbed 80 percent, and Rosenberg described classic bubble characteristics: overheated prices, overownership, too much debt, speculation, complacency and denial.
He noted that subprime lending to people with lower credit scores and incomes had risen 25 percent on average throughout the decade, and that lenders could be at risk if people couldn’t make payments or sell their homes in a weakening economy.
“About a third of first-time buyers,” he said at the time, “have strapped on so much mortgage debt that roughly a third now pay at least 30 percent of their after-tax income on shelter, and half of the lowest-income households spend at least 50 percent of their income on housing.”
Citigroup economist Steven Wieting raised similar concerns. And as ARMs became increasingly popular, Morgan Stanley economist Stephen Roach also referred to an “ominous surge in demand for adjustable-rate mortgages,” especially among lower-income people who wouldn’t be able to afford higher payments. Roach noted that from 2001 to 2003, ARMs amounted to about 20 percent of new mortgages, but by May 2004 half of the people getting loans were taking chances on them.
Meanwhile, Yale economist Robert Shiller emphasized to Barron’s magazine that home buyers were making the dangerous assumption that “nothing beats a home as an investment because prices just keep rising.”
I am a Realtor in Conway, Arkansas and am getting rather tired of everyone talking about how bad the market is EVERYWHERE. In our market last year, the average home price rose by just over 5% from the previous year. However, I am seeing more and more people reluctant to buy and sell not because of financial condition but instead because of constantly hearing from the national media and others how bad the housing markets are. The misleading information is so overwhelming that buyers and sellers are starting to believe it.
Also, I think it is news worthy that nationally 1 in 775 homes is in foreclosure; however, only 1 in 2,323 Arkansas homes are in foreclosure. According to, http://realestate.msn.com/buying/article2.aspx?cp-documentid=4734608 .
As we start the new year, I am already seeing an increase in activity and fully expect in our market to be back on track as far as number of transactions in 2008.
Greg Moss – Crye-Lieke Realtors
http://www.GregMossRealtor.com
http://www.MovingToConway.com
Greg,
You anticipate an increase, huh? Then Conway, AR must be an economic mecca de-coupled from the realities of the rest of the country, eh?
I sure hope so, because unless the following factors exist, then you should admit you don’t understand how economics works and stop giving people financial advice:
- No existing homeowners there have adjustable ARMs, interest-only loans, or Alt-A loans that reset
- Buyers there have cash to pay for the entire home purchase price
- Buyers there are all sitting on wealth insulated from equity markets
- Buyers there are not like the rest of the country and are not over-extended on other leverage such as credit cards, auto loans, etc.
- Buyers there are not dependent on jobs for income
- Buyers there don’t mind if their neighborhoods begin to look like ghost towns because of foreclosures and personal bankruptcies, thereby vacating properties
- Buyers there don’t mind global interdependencies causing them to lose equity after they buy their house
The reason that people are hesitant is because the morally bankrupt NAR has been advising them all the way to the poor house, and although I would say most of our country is inherently stupid nowadays, eventually they get the idea.
Could it be the conflict of interest that realtors have? Could it be that every one of your predictions has been erroneous, time and time again? Could it be that anyone with the slightest knowledge of economic theory can see that housing is only at the tip of an implosion? Could it be that people see realtors frequenting blogs making bullish predictions, wondering why they have time to do so and why they are so vested in commenting?
Thank GOD outlets like this exist to protect the unsuspecting public from predators like you.
Greg,
I was going to give you the benefit of the doubt until I read closely, and noticed you linked to a site that was about a year old. According to the below Reuters link Ark foreclosure rates are up 40% year over year. Please get your facts straight before posting.
http://www.reuters.com/article/pressRelease/idUS98049+19-Dec-2007+PRN20071219
Alan-
I thought you did a great job of listing the factors that our causing problems. The “Irrational Exuberance” of the bubble markets mean that they were hit sooner, and will be hit harder than other markets. Non-bubble markets however, had the same wonky financing and in many instances the overbuilding.
An imbalance of supply and demand is going to shift the market, and it doesn’t really matter what causes it. Look at Detroit. Economic factors there have caused a net migration out. No bubble, but more supply, less demand.
In addition, it’s important to look where markets are headed. Even if things aren’t in too bad a shape at the moment, if builders have more supply coming on line than fundamentals dictate, you can figure you are probably looking at problems down the road.
greg, i assume you had no problem from 2002-2005 when the national media were all a twitter dressed in cheerleading outfits with giant pom poms and “HOUSING” across their chests.
proclaim that you think the NAR is a pathetic joke of an organization with no credibility and you will gain a lot of it.
A Realtor posting misleading comments and false statistics to dupe potential commission payers? Well I never! I’m shocked I tell you, just shocked.
Well, I guess I’ve been lurking too long, so time to join the fray! I’m pleased that Greg was willing to post to the site and I hope that he is willing to provide periodic updates on how the Conway, AR housing market does during 2008.
I honestly can’t agree with all of Alan’s statements, which if taken in summary declares that a national (if not global) depression is imminent. No housing market, at any time, no matter how healthy, can possibly meet the criteria (as I interpret them) that Alan has put forth:
-buyers have ability to pay 100% cash for property
-buyer’s money is stuffed in a mattress (therefore, not impacted from any national or global downturn)
-all buyers are financially independent (ie, not working and no need to work to meet financial needs)
Having said that, blaming the media is a time honored but useless practice. Even if we are not headed for a global economic meltdown, there are plenty of signs that should give any buyer pause before taking (or attempting to take)the realty plunge:
-The US may already be in a recession, and I don’t see any reason that makes me think that things will improve much in 2008.
-There is no reason to think that the national housing market will rebound in 2008. There are too many looming foreclosures and far too much inventory. There is bound to be a dampening effect on regional markets that are in decent shape – like, perhaps, Conway, AR.
-Criteria for securing a mortgage will be much stricter for the foreseeable future. I would guess that all prospective buyers will need 10% down, full documentation and a healthy FICO score to even be considered. Buyers looking to purchase property that is above the Fannie/Freddie purchase price (ie, $417K) will probably need to have the full 20% to secure a loan.
So I guess I am still on the fence. I think that Conway, AR would make an interesting test case for 2008. Maybe we could agree upon what a “back on track” number would be and measure actual sales against that number.
Anyway, great site – I have been an avid reader of it for over a year.
weepstah
Greg get real, once Acxiom folds the tents Conway’s economy will be in the toilet my friend. Housing inventory will be up and prices will plunge.