"The housing boom ended more than a year ago, but sellers are having a tough time accepting that fact, says David Lereah, chief economist at the National Association of Realtors. The result has been tumbling sales as buyers stay on the sidelines.”
“The expansion that began in November 1991, when mortgage rates fell into single digits, became a boom following the 9/11 terrorist attacks, when trillions of dollars left the stock market looking for a safe haven in real estate, Lereah said.”
Mr. Lereah talked about the current 'correction' that the housing market is experiencing.
Source: (Times Union 9/19/06) Hat Tip: Ben Jones' Blog for finding this gem. Back in October of 2005, in his infamous anti-bubble reports, Mr. Lereah said that prices will not experience a 5% price decline unless there are high interest rates and or large job losses. For metropolitan Sacramento, CA their anti bubble report (pdf) stated that:
“This correction is different from any others because it wasn’t triggered by a recession, high financing costs or job losses. With unemployment below 5 percent, mortgage rates still below 7 percent and a growing economy, ‘all you need is a price correction, a price adjustment, to bring the market back,’ Lereah told the crowd.”
“The transition to lower prices is already under way nationwide, Lereah said, and will result in a more balanced market than the one that has been dominated by sellers. He said the Capital Region experienced ‘a moderate boom’ without the extreme price run-ups or overbuilding seen in parts of California and Florida. As a result, ‘you don’t need as much of a price correction,’ he said.”
“Lereah predicted prices will drop nationally over the next six months, and that each percentage point drop ‘will bring thousands and thousands of buyers back into the marketplace.’”
The local housing market will experience a price decline of 5% only under extreme unlikely scenarios. For example, mortgage rates rising to 7.8% in combination with 25,000 job losses could lead to a price decline.
Neither of those things happened in Sacramento and yet prices are down 5%. Now Mr. Lereah claims says that "This correction is different from any others because it wasn’t triggered by a recession, high financing costs or job losses." This 'correction' was primarily triggered by the excess that resulted from the speculative episode. The fundamentals become totally disconnected from reality.