NAR to Bernanke: Don't Raise Rates

The National Association of Realtors is trying to tell the Federal Reserve to stop raising short term interest rates. The Washington Post Reports:

The National Association of Realtors on Tuesday lowered its forecast for U.S. home sales in 2006 and called on the Federal Reserve to stop raising interest rates because parts of the housing market are "vulnerable."

"Experiencing a slowing from a hot market is a good thing because we need a solid housing sector to provide an underlying base to the economy, and slower appreciation will help to preserve long-term affordability," said David Lereah, the group's chief economist, "But this is a time for the Fed to pause on rate hikes because we have some interest-sensitive housing markets that have become vulnerable.," he said

Mr. 'soft landing' Lereah is saying that some markets are 'vulnerable' to interest rates hikes. They are vulnerable with or without the interest rate hikes. Other things being equal, the interest rate hikes at the Federal Reserve make housing markets even more vulnerable to price declines.

According to the National Association of Realtors, even the bubble markets will only experience price declines if 'extremely unlikely scenarios' occur. In their anti bubble reports, we have a stress test for Miami:

The local housing market will experience a price decline of 5% only under extreme unlikely scenarios. For example, mortgage rates rising to 8.3% in combination with 60,000 job losses could lead to a price decline.

The National Association of Realtors is now in the comical position of telling the Federal Reserve to not raise rates. I smell desperation. Mr. Lereah needs to remember that interest rates on mortgages are still historically low.