Thursday, September 14, 2006

NAR's Written Statement Before The Senate Banking Committee

Written Statement of the National Association of Realtors (NAR) before the Senate Banking Committee. Here are excerpts:
NAR represents a wide variety of housing industry professionals committed to the development and preservation of the nationĂ‚’s housing stock and making it available to the widest range of potential homebuyers.
How does cheerleading dramatic home prices increases help the 'widest range of potential homebuyers?' The NAR continues in its written staement:
After five years of outstanding growth and being the driving force of the U.S. economy, the housing market is undergoing a period of adjustment. I have experienced this first hand as my prior home has been on the market, in Northern Virginia, for over a year. Existing home sales in July fell 11.2 percent from a year ago. New home sales are down 22 percent from a year ago. The inventory of unsold homes on the market is at an all-time high of 3.9 million, which is a 40 percent rise from a year ago. Given the falling demand and increased supply, home prices have seen less than 1 percent appreciation from a year ago compared to the double-digit rate of appreciation in 2005.
Ok. Does the NAR think there is a housing bubble?
Contrary to many reports, there is not a '“national housing bubble.'” All real estate is local. For example, the housing market in California is extremely different from Oklahoma. Home price-to-income ratio, home price-to-rent ratio, and more importantly, mortgage debt servicing cost-to-income ratio have greatly increased in some markets to worrisome levels. Markets in Florida, California, Arizona, Nevada, Virginia, and Maryland exhibit trends far above the local historical norm, thus it would not be surprising for these markets to experience a price adjustment. However, these states have solid job growth Ă‚– Because of solid job growth, price declines are likely to be short-lived as new job holders provide demand and support for the housing market.
The "solid job growth" that the NAR speaks is made only possible because of the housing bubble. As the housing market declines the 'solid job growth' will reverse course and there will be layoffs in the housing industry. NAR on a what sort of landing there will be:
NAR understands that the housing sector could not maintain a record setting pace indefinitely. A soft landing is certainly possible and under the right circumstances likely, but that soft landing is critically dependent upon policies that support a transition to a more normalized market and mitigate changes in local markets in the availability of mortgage financing and other essential elements to homeownership
They conclude by saying "The NAR stands ready to work with Congress to continue to open the door to the American Dream of Homeownership." A lower price would certainly help.


  1. But it's always a good time to buy, you know.

  2. "The "solid job growth" that the NAR speaks is made only possible because of the housing bubble. As the housing market declines the 'solid job growth' will reverse course and there will be layoffs in the housing industry."

    David, job growth means increasing numbers of jobs. Even if we were to assume that real estate related jobs were significant to the economy around here (which I don't see how they could be), I think we could both agree that at least that for this past year there has been no real growth in the number of real estate related jobs since as you often point out, things aren't selling like before. I can't see more hiring going on here. No, the job growth is coming from elsewhere. In this area, that growth is coming specifically from the additional billions of dollars being spent locally by the federal government in its efforts to move all its operations into the technilogically savvy 21st century ... increasing its command, control, and other capabilities. This job growth is financed by taxes raised throughout the nation, but spent disproportionately here. It is not going to reverse itself anytime soon.

  3. Lance,

    You have a fair point if we were talking about locally. I was talking about nationally.

  4. Why would the Senate Banking Committee would want NAR to weigh in on the current housing bubble.

    NAR has a vested special interest in the market, selling houses pays their salarys; not to mention dues they collect from the agents.

    The Goverment is covering their rear, when the market dumps and the nation enters a recession.

  5. Owning your home outright is being just like the rich people are. Paying nobody interest is just like saving money. Using your freed up capital to invest in other ventures is more rewarding.

  6. "Hopefully, rates don't increase to levels where homeowners can't afford paying their mortgage payment."

    What you are either ignoring or failing to understand is that if rates do increase, then home prices will have to come down (albeit gradually); otherwise nothing will move. If people can't afford it, then they can't afford it. It really is that simple; although the last few years of financial recklessness has confused the issue just a bit.

    Further, the *general* environment now & going forward is one of tightening lending no new "progressive" mortgage products are likely to be rolled out to help people "afford" over-priced homes.

    In other words, put a fork in it.

  7. Job growth continuing due to government contracting? I don't know about that ... we're looking to bring in younger new hires directly from undergraduate schools to fill junior engineering positions and everywhere we go we hear something along the lines of "NoVa is a nice area, but the cost of living is too high; can't afford to buy a place and I don't want to live with 3 roommates for 5 years." My personal experience is telling me that this sharp increase in prices over the last few years is actually hurting our ability to bring more folks into the area.

  8. "This job growth is financed by taxes raised throughout the nation, but spent disproportionately here."

    Let's see, the U.S. was in the red last year (again), Congress authorized raising the debt ceiling to something like $9 Trillion and Homeland Security and other Departments are cutting back on spending. Seems to me that job growth is not being funded by taxes, but rather, by deficit spending and that cutbacks are going to begin to affect those contracts.

    Albeit, war with Iran may affect the above in either way- positively (more government spending of money we don't have) or negatively (attacks in DC).

  9. so they are saying there is local bubbles, then right after that, there is a national soft landing.. pretty easy to see they are saying there are local hard landings.
    i'm pretty surprised they're this honest

  10. "and I don't want to live with 3 roommates for 5 years."

    That's great and certianly illustrative of this POS overpriced market!

    In any normal market, LL's actually abhor renting to numbers of roomates and most would not even consider it. Here, however, they actually encourage and advertise it! LOL.

    I guess, however, that it's better than living with your parents till your 40 under the new David Lereah "Euro-dynamic."

  11. anon 7:18, junior ee in nova here. you mind saying what company that is?

    as for job growth, i guess the intel and hp layoffs, to name a few, in those states arent a big deal

  12. Ah Mr Remax, posting on bubble blogs? You must be desparate for buyers. This is the deal. Blanche from Realty Times emailed me and said enthusiastically that there is a robust market in Dallas. I emailed her back and stated that it doesn't matter what is going on in Dallas, or, as the NAR says, Oklahoma. The reason is that the dollar value of real estate is modest in those places compared to the bubble states. Eight normal houses for sale a block from me are worth 50 million dollars taken together. In Oklahoma it would take over twenty regular houses to be worth that much.

    I drove by a house here in Nevada which is an older house, with 4k square feet, but is offered for just under one million dollars. This is an older tract house with some rich upgrades. Who on earth with a mil to spend on a house would want a tract house? It makes no sense. It is pure insanity.

    So, Mr Remax, house values will fall, and there are forces causing that, like the outsourcing of good paying jobs, the creation of poorly paying service jobs, the lack of wage gains by the middle class, etc. Many have decided it is too risky to buy in this environment and I agree with them.

  13. The NAR is hardly an unbiased source. How can they brazenly make these statements. By the way, how hard is it to become a "realtor" Does it compare with the education of an MBA or for that matter a pharmacist, nurse or engineer? Why do people trust these folks with their biggest single purchase?

  14. MRED1 asked:
    "Why do people trust these folks with their biggest single purchase?"

    Real estate agents are experts at the sale and purchase of real estate. They'll be able to tell you if you're getting a good price for your house or if you're overpaying for your new house in conjunction with where the market is now. They'll also be able to steer you toward people who can help you with the financing. But if you are counting on them to make your financial decisions, then it is you who is at fault!. For example, if I want a kitchen renovated, I might find a great contractor to do the work, but I wouldn't trust the contractor with doing the design for the new kitchen. I'd go to a designer for that. It's the same thing when it comes to your finances. If you have allowed a real estate agent to consel you on your finances, then you are the fool.

  15. creativemind asked:
    "what are these poor folks going to do when their "ARM" resets?????"

    use their buyout money to pay off their mortages?

  16. Creativemind said:
    "AmEx Allows Customers to Charge Condo Down Payments"

    Creative, do you know the difference between a credit card and a charge card. Charge cards have to be paid off in full monthly ... no credit.

  17. dc_too said:
    "That is really stupid, Lance. Any competent contractor can "design" a kitchen, for God's sake. It's not rocket science."

    yeah ... I'd luv to see your kitchen!

  18. Address: 1822 4TH ST
    SSL: 3094 0825
    Neighborhood: LEDROIT PARK
    Homestead Status: ** Not receiving the Homestead Deduction
    Mailing Address: 1822 4TH ST NW; WASHINGTON DC20001-1817
    Sale Price: $2,500,000
    Sale Date: 08/03/2006

  19. TK said:
    "oh well i guess i've been corrected."

    yes, I have a fixed rate loan.

  20. creative mind said:
    "lance, .... when their "ARMS" reset you are assuming that they CAN SELL THEIR HOUSE...."

    No, I'm simply making the point that the payouts aren't paltry ... I think I read that the longtermers were getting something like $140K as a buyout. In most areas where Ford has manufacturing plants (such as Michigan and the Deep South), houses don't go for much more than that. I guess the bigger point is that you can't always guarantee life ... There will always be risks.

  21. va_investor said...
    “Perhaps, some of the "experts" around here can explain it for the hundreth time. Nikki? Robert??”

    Someone invoke my name?

  22. Dave,
    You should call this the Lance and va_investor blog. They really have hijacked what could have been an awesome blog on the bubble in d.c.

    Like all the baby boomers getting ready to retire from the gov are going to stay in d.c. and all the new younger gov employees are going to buy a condo as condo prices fall. yea right.

  23. A lot of the govies I know getting ready to retire (or already retired on the jog) have tropical shirts and ready to get out of dodge.

  24. And I came in with 25% down. And since then it's value has risen a minimum of 25% based on what neighboring properties of similar size and condition have sold for since I bought. I'm currently already at something like 45% equity. 9 years from now (when it resets) ... I can't predict the future, but even minimum annual increases will bring my equity share to well over 50%? 60%? more? Upside down? Not a chance.

    What I find amazing is how people can make such obviously envy-driven statements in public. I'd be too embarrassed to say such things! It really doesn't reflect well on someone to wish bad on others. Envy is not a pretty emotion.

  25. DC_Too,

    You're really something else. Let's see, you're "curious that DC government internet records do not predate 2000"? ... Hmmm, could it be that 1999 is the year they rolled out the on-line system? Yep ... My second condo was bought that year and was in there. My earlier condo bought in '96 was not ... only "unavailable". Of course, this skeptism coming from a bubblehead doesn't surprise me. The whole premise of a bubble is only possible if one believes in a conspiracy promulgated by the infamouse Real Estate Industrial Complex! I guess when one cannot understand and/or accept the facts behind a situation, it is human nature to believe some all powerful force has conspired behind your back. I.e., paranoia lurks inside many of us only raising its ugly head when we are confused and maybe feeling threatened ... but have no explanation for what is happening and thus no way out ... unless we invent that explanation!

    Secondly, actually, I do believe you about your 659% increase. But, what you are failing to acknowledge --- or at least mention --- is that MOST of that increase was due to a real and non-argueable increase in value due to a changing city. Dupont is not the same place today it was in the early '90s. Nor is DC now that it is no longer in bankruptcy and the crime rate is vastly down from what it was then (despite the so-called "crime emergency" triggered by a few, well-publicised deaths and assaults in very well-heeled areas. You've sold thinking you will re-purchase when "the bubble bursts"? I've got news for you. The bubble only speaks to "unjustified" price increases ... NOT justified price increases as the changing neighborhoods in places like where you sold have experienced over the last 10 years or so. I think even David would agree that he doesn't mean bubble bursting to mean that properties/neighborhoods that are substantially and verifiably improved in real terms such as safety and desirability will return to the same sales prices as pre-this real improvement. That's just not what bubble means. That means you going to have to settle for "the hood" again, if all you are looking to spend is what you paid in the early 1990s. But, something tells me that won't bother you ... afterall, you bought in an area that WAS the hood back when you bought ...

  26. Keep up the GREAT posts

    Never get the truth from these Bums.

  27. dc_too,

    I'll post yoru HUD info from Dupont

  28. "Like all the baby boomers getting ready to retire from the gov are going to stay in d.c. and all the new younger gov employees are going to buy a condo as condo prices fall. yea right."

    Doesn't the Bubblehead creed dictate that FL and CA are unviable markets? But aren't those markets traditionally the destination of retirees? So on the one hand, all retirees are going to bail out to warmer climes, but on the other hand, the warmer climes are uninhabitable because of existing bubbles. So which is it?

    Will the exodus from DC drive prices down here and sustain the bubble markets in warmer climates indefinitely? We need to exclude FL of course; just look at David's posts about how FL is a constant nightmare because of hurricanes and associated factors.

    No no, in reality - Retirees will move into cities to take advantage of the cultural amenities that cities offer. Dining, entertainment, convenience, reduced dependence upon automobiles, proximity to quality healthcare, etc.

    Washington DC is a good (and getting better) city to retire to. I'm talking about *DC* here. Not manassass; not Gaithersburg. *Washington*

  29. "Well then, you should be buying with both hands. Sell a kidney and get a couple of extra townhouses. The last two reversals didn't really happen. DC got hit, FLA got hit, and CA really got hit in the late 80's early 90's."

    "FLA" ceased to represent the state of Florida (FL) sometime in the 1970s. That was over 30 years ago; about the same time that FL was a desirable place for fed employees to move to after retirement.

  30. "solid job growth" ???

    Lets see Maxtor which was acquired by Seagate lays well over half world wide.

    Intel Layoffs 1,000 mid level (well paid) workers. Mostly in Santa Clara, California. The heart of the No Cali Housing Bubble.
    They are about to layoff another 15-20,000 across the board. Again Highly paid from California.

    Sun Micro systems still pondering on another 15-20,000 in layoffs.

    HP has already laid off 10-15,000
    mostly in No Cali.

    Plenty others still be taken out due to high cost of doing business and low profit return.