So, what are Lawrence Yun's housing predictions now?
Is this what their cheerleading has come to? Have the past four years made them that demoralized? Are they actually being honest now, or is this just the best cheerleading they can do while still sounding believable?Nationwide, homeowners can expect little, if any, increase in home values in 2011, the National Association of Realtors said in a forecast released Friday at the group’s annual conference in New Orleans.
And it will take another two years to clear the foreclosures and short sales on the market, said Lawrence Yun, the group’s chief economist, at a news conference.
An observation: While the financial industry's reputation has been brutalized in the press, the reputation of the National Association of Realtors has escaped scot-free, despite the major role it played in misleading the American public during the bubble.
Via an old Lawrence Yun Watch blog post, here's a video to remind us of how deceitful the Realtors were back then:
Lawrence Yun takes full responsibility for everything he does. Extra ordinary post and the video.
ReplyDeleteMonthly stats are out. NVAR median prices rose yet again - now up 12% YOY.
ReplyDeleteHey anon - remember 2 years ago when prices started going up and all the bears came out angrily declaring that it was "a blip" and that we were "nowhere near the bottom"?
ReplyDeleteThat was fun wasnt it!!!
Hey Anon 2 which is the same person as Anon 1...don't tell the owner of this property--in an exclusive area of Alexndria--that prices have increased. The value of that property has dropped to $772,500. It was purchased in 2005 for $926,100. So why hasn't this property value risen?
ReplyDeletehttp://www.zillow.com/homedetails/2408-Ridge-Road-Dr-Alexandria-VA-22302/12031932_zpid/
I think you have to view realtors as sales and marketing people for housing. It isn't any different than walking into a used car lot and having the salesman come out there and give you the hard-sell on some old POS.
ReplyDeleteThe problem is that most people don't see them in this role. They see them as people who are more impartial than they really are, and who happen to know something about houses. And for that matter, that's the public image that realtors try to present. To the average person, buying or selling a house is a stressful process that involves lots of steps that they don't really understand very well.
True story. Years ago I was shopping for a car. I went into one dealership, and didn't see anything I wanted. He had this old Mercedes over in the corner - older than what I was trying to trade in. I was starting to walk away, and the guy said "hold on a sec - let me get some jumper cables and we can take it for a test drive".
Another true story. Later on I was in a different dealership. They had some car - I think it was an old Volvo or something. For some reason the salesman wanted to start it - I was standing outside next to the drivers door looking back. As he started the car, I saw a big cloud of smoke blow out of the tailpipe. Then I noticed that the car had a "rejected" sticker where it should have had an inspection sticker. According to the slip, it failed due to "visible smoke emissions".
These stories while a bit off topic serve to illustrate my point. That the realtor will *always* tell you it is a good time to buy. If they don't get a sale, they don't get a commission - that should be pretty obvious to everyone. If the Yun came out and made a public statement that buyers should sit it out for a year or two, the realtors out there would be calling for his head as they would have no income if people did this.
Love the Ridge Rd house...of course, Zillow shows a slight rise in value for the most recent update, but yeah, nowhere near 2005.
ReplyDeleteThe value of that property has dropped to $772,500. It was purchased in 2005 for $926,100. So why hasn't this property value risen?
ReplyDeleteWell, I guess that proves it. The fact that 1 house is not at peak proves that median prices for the other 1,400,000 homes in the NVAR area have not risen.
How could I be so stupid as to look at metrics such as median and MOI to determine bottom when all I had to do was look at a house on ridge road!!!
"Well, I guess that proves it. The fact that 1 house is not at peak proves that median prices for the other 1,400,000 homes in the NVAR area have not risen."
ReplyDeleteWhat it proves is that people who tout these regional statistics fail to offer the disclaimer that these are a collection of prices from various areas and an array of different homes. How much is a 12%gain when your value has decreased 35%?
"What it proves is that people who tout these regional statistics fail to offer the disclaimer that these are a collection of prices from various areas and an array of different homes."
ReplyDeleteWhy the fuck would you need to offer that disclaimer!!!
It from the beginning (back when the bears ruled this blog and told us it was the best indicator of price direction) it was clearly framed as median prices. Who here is so retarded so as to not understand what "median" means???
The deficit reduction commission wants to get rid of the mortgage deduction. That will be a big deal. If it happens, imagine it will be gradual roll-out and not take effect for several years. But it will change the math on home buying.
ReplyDelete>>An observation: While the financial industry's reputation has been brutalized in the press, the reputation of the National Association of Realtors has escaped scot-free ..<<
ReplyDeleteThere is the National Association of Realtors and then there are Realtors. Two different things.
The association is an industry group behaving like all industry groups, which is to put a smiley face on everything.
Your local Realtor may be someone you know, had a good relationship with, and it may not be the realtor's fault you took out a toxic loan to buy the house. Your Realtor may even cautioned you. Conversely, your Realtor may have reinforced your private fantasy about home value.
An economist at NAR, even those who testify to Congress, is not in the same universe of a bank that handed out a toxic loans.
I think most people are smart enough to realize that an economist from a trade group is representing a vested interest.
So, no, I don't see the NAR getting called on this but it's been hurt nonetheless.
What hurt it was the trust level, and buyers are probably a lot less trusting of data from their Realtors.
The only way for the NAR to recover from the credibility hit is to be more clear-eyed about what's actually going on, something you suggest they may be doing.
The NAR will never have credibility with the bubble bloggers, who will remind time and again, what they said during the bubble. That's all well and good, but the past isn't the future for the NAR.
Consumers will be smarter until everybody forgets in a generation and we do it once again.
Heard an interesting stat today. The three counties around DC now have the highest per capita income of any in the US. I didn't hear the entire report, but also in the last two years the number of Federal workers earning over $100K has risen greatly, maybe doubled or more. Didn't hear it all.
ReplyDeleteThat has to help local real estate prices.
IMHO those trends will remain largely intact until at least 2012.
If some real spending hawks get into power in numbers after that, well, then it's all different.
As far as the NAR, are they not just echoing the trends? When prices were spiking with no end in sight, they said as much. Now that nationally things are down, heading lower, and there is no end in sight, Yun is stating the apparent.
Personally I don't find truisms cast as forecasts helpful, but there are certainly plenty of such things around.
I suppose as a spokesman he has to say something, and he did.
jj
"I didn't hear the entire report, but also in the last two years the number of Federal workers earning over $100K has risen greatly, maybe doubled or more."
ReplyDeleteYep, and the number of 100K workers has gone up 10X in the last decade.
http://www.usatoday.com/news/nation/2010-11-10-1Afedpay10_ST_N.htm
One of the reasons "its different here". Sigh.
"Heard an interesting stat today. The three counties around DC now have the highest per capita income of any in the US. I didn't hear the entire report, but also in the last two years the number of Federal workers earning over $100K has risen greatly, maybe doubled or more. Didn't hear it all.
ReplyDeleteThat has to help local real estate prices."
"One of the reasons its different here. Sigh."
I also heard that the DC area has the highet monthly household expenses in the country. That won't bode well for house prices!
I also heard that the DC area has the highet monthly household expenses in the country. That won't bode well for house prices!
ReplyDeleteWhy? When 7 of the 10 richest counties in America are local, it makes sense that we would spend the most on clothing, cars, food, housing, etc. Why not say that doesnt bode well for food prices!
Because food prices are not sensitive to interest rate fluctuations like home prices are. When these historically low mortgage rates begin to climb, then those monthly household expenses really come into play.
ReplyDeleteSo stay tuned!
Again - you say that but its not true.
ReplyDeletehttp://seattlebubble.com/blog/wp-content/uploads/2010/02/KC-Home-Price_1950-2009-nominal.png
Take a look again at what nominal prices did as interest rates spiked in the early 80s. The same is true on a national scale.
Look I know its comforting to tell yourself that "higher interest rates = lower home prices", but the fact of the matter is it is not true. The sooner you realize that, the sooner you will be able to prepare for the great disappointment when rates rise and nominal prices continue to inch higher, just as they have done throughout history.
I knew it was it was mr. Seattle blog. You must lead a boring life hovering over your computer waiting to paste that link. Do you really believe an increase in interest rates will not have an affect on prices?
ReplyDeleteAnonymous said...
ReplyDelete"The deficit reduction commission wants to get rid of the mortgage deduction. That will be a big deal. If it happens, imagine it will be gradual roll-out and not take effect for several years. But it will change the math on home buying."
I got a bit excited when I first heard that news, but it's not really true. Getting rid of the home mortgage deduction would only apply to SECOND homes, not someone's primary home. Also, the home mortgage deduction would have a $500,000 cap, but keep in mind that the median home value in the U.S. is only about $175,000, so the cap would only apply to people in Arlington.
Do you know how many times Mr. Seattle blog has posted that link? Every time someone mentions interest rates he pulls out that link and tries to silence them with it. What he doesn't understand is the increase in home values were far more significant during 2000 - 2004 than any other time in history. Many homes are still overpriced today and until the fundamental relationship between household incomes and home prices are reestablished, you will have inflated values. To claim that there was no relationship between the bubble values and interest rates is a foolish statement.
ReplyDelete"What he doesn't understand is the increase in home values were far more significant during 2000 - 2004 than any other time in history. Many homes are still overpriced today and until the fundamental relationship between household incomes and home prices are reestablished, you will have inflated values"
ReplyDeleteI understand that perfectly - but thats a completely different argument isnt it?
Your argument now, in sum is "houses are overpriced in relation to incomes". While I may disagree slightly with the "overpriced" part here, now, in late 2010, I do not dispute in any way shape or form that there is a fundamental relationship between home prices and incomes. This argument has been proven, again and again and again.
However, this is not what set me off. What set me off is the statement (verbatim):
"Because food prices are not sensitive to interest rate fluctuations like home prices are."
This is an entirely different argument than the "fundamental relationship between prices and incomes", and it just happens that this argument appears to be out and out false. That is why I pulled out the seattle graph, and will do it, time and time again so long as that spurious "higher interest rates = lower nominal home prices" agrument rears its ugly head.
Look, if you want to say home prices are inflated in relation to incomes, here we can simply agree to disagree. You say its unsustainable. I say its close enough that inflation will do most of the heavy lifting from here.
However, on the argument "higher interest rates = lower nominal home prices", unless you can point to compelling evidence of the contrary, there is simply nothing to debate.
One thing I've learned from this most recent bubble cycle is that people act very emotionally when buying homes, greatly clouding market mechanisms.
ReplyDeleteI get the feeling that during the boom years people would pay $10K a square foot if the loan would go through, banking on the home as an investment.
Higher interest rates lowering home prices makes perfect sense unless the buyer wants the house so much they just don't care. We saw a lot of that this cycle.
Remember "Buy now while you can still afford to!" ?
More than any other market I've followed, animal spirits rule the day.
jj
"One thing I've learned from this most recent bubble cycle is that people act very emotionally when buying homes, greatly clouding market mechanisms."
ReplyDeleteWere they not emotional back in the 1980s when the mantra was "buy now before rates rise again"?
Answer: No.
ReplyDeleteWhat was household personal savings rate in the early 1980s? Any idea how that factors into the home purchasing equation?
In 1981, when the average national 30-year fixed-rate mortgage reached a historical high of 18.63%, about 40% of all home sales utilized seller financing, according to the National Assn. of Realtors.
Today, less than 4% of the nation’s residential sales rely on the seller to finance the deal, as low interest rates allow most buyers to qualify for institutional loans.
So don't compare the 1980's to this period. You rookies simply look at statistical data fail to conisder the variables that contribute to the data. Like Mr. Seattle, your are very short-sighted.
Take a look at the hitorical median home values of homes in DC using adjusted 2000 dollars.
2000 1990 1980
$157,200 $158,300 $136,200
1970 1960 1950 1940
$81,800 $75,900 $87,800 $78,800
Why did the value drop from 1960 - 1970 and then again from 1990 - 2000? Was it due to interest rates? What was the cause?
People like Mr. Seattle blog are simplistic thinkers. They look to the past to support their statements about the future. When Mr. Seattle blog asserts that a rise in interest rates has not had an affect on prices citing one study, he erroneously believes all of the economics of the past remain the same today. Unfortunately that is not the case. So Mr. Seattle blog, keep believing home prices have no relationship to interest rates. I bet you have the book Dow, 30,000 by 2008 "Why It's Different This Time". Keep believing in your illusions!
ReplyDeleteIts not a "study" that I base my conclusions upon, its history - namely the history of the last 40 years of prices and the last 40 years of interest rates.
ReplyDeleteIts very easy for anyone to see. James has the same info for the last 40 years in the entire united states. Feel free to graph it if you want.
http://mysite.verizon.net/vzeqrguz/housingbubble/
Oh, and yes I do "believe(s) all of the economics of the past remain the same today". Seller takeback financing has been around for literally hundreds of years (still very common in small business finance). If rates do rise, so will seller takebacks, just like they always have.
If anyone is believing "its different this time", its you. History has clearly shown, high interest rates does not mean lower prices. I thus believe (if rates rise) things will continue on as they have for 40+ years.
You believe if rates rise, it will for the first time in recorded history push prices lower. You are the one who believes "its different this time".
Ask all the people who have had adjustable rate mortgages that saw there rates rise in 2007 and now facing foreclosure if they could afford to buy the homes they are losing? Do you know anything about supply and demand? Could you carry on an intelligent discussion on your own without pasting the link?
ReplyDeleteIm sure several of them would be in more distress.
ReplyDeleteNevertheless, if we have rising interest rates, it will, as it has with every other past incidence throughout history, be accompanied by rising inflation.
In order to have rising inflation, wage inflation is a necessary (yet lagging) component thereof.
Thus, while there would be some people whose wages do not rise, the majority of them would, and they presumably could continue just barely afford their house, as they had just barely afforded to in the past.
In any event, for those who were losing them, there would be more than enough people out there with wage inflation who would be willing to use their inflated wages and buy, thereby bailing them out.
Note, this is not in any way a panacea that I am describing. If you look at the chart (which you hate oh so much) you will notice that the pace of the price increases abrubply slows just as interest rates spike. It is a hardship to be sure (again because wage inflation is a lagging, but necessary component of inflation), but it is there. Hence, if we do have high interest rates, we will see what we always see - nominal prices slowly inching forward - much to the consternation of those who think "higher rates = lower nominal prices"
I would like to offer a comment on this blog. The chart cited by one of the posters on this blog is of one county in the entire United States. To make a statement that rising interest rates do not result in lower prices based on a single county is absolutley ridiculous!
ReplyDeleteThe chart cited by one of the posters on this blog is of one county in the entire United States. To make a statement that rising interest rates do not result in lower prices based on a single county is absolutley ridiculous!
ReplyDeleteE pur si muove
Yup - look at the chart Oboe provided to see what happened to nominal prices in the "entire United States". Again, during the 1980s as interest rates spiked, nominal prices continued to inch higher and higher.
ReplyDeleteYou cannot compare the 80s. Purchasers were allowed to assume sellers' lower mortgage rates through seller financing. You have very little of that today. Show me a graph on today's seller financing graph boy. Show me!!!
ReplyDelete"Purchasers were allowed to assume sellers' lower mortgage rates through seller financing."
ReplyDeleteAs they will this time around. As I said before, seller takeback financing has been around for a long time (at least 600 years). Seller takeback will continue to wax and wane in popularity depending upon the interest/inflation rate at the time.
To assume that "its different this time" and seller takeback or similar installment sales purchase schemes are somehow, now after hundreds of years not applicable is the same flawed thinking that assumed a few years ago that home prices "cannot go down".
So what percentage of owners mortgages have mortgages that may be assumed? Give me the graph!
ReplyDeleteAgain, if you go to seller takeback (which they will) the percentage is immaterial.
ReplyDeleteGive me the graph!
ReplyDeleteYes, show him or her the graph. No one is going to believe your statement about takebacks. If what you say is true, you should be able to back it up. So either put up or shut up! Where is the graph?
ReplyDeleteYes, show him or her the graph.
ReplyDeleteWhy are you talking to yourself? Is it because you have lost the argument, and the only way to bolster your position is to create a fictitous group of anonybloggers clamoring over a 2 week old post to see a graph of the number of people who have assignable contracts?
If it makes you feel better, I would be willing to stipulate that the percentage was 100% back in 1980 and 0% today, On a graph that would be a straight line going down.
Or if you prefer, I will stipulate its 100% today and 0% 30 years ago - or really any combination in between those extremes. Either one is fine with me since, as I noted before, assignability is immaterial for installment sales finance.
So, now that has been stipulated to, what do you (and the "other anon") have in your never ending list of objections for why "its different this time"?
Words mean nothing, show me the graph.
ReplyDeleteOK
ReplyDelete% of assumable mortgages
100%
. \
. 0%
1980 2010
Next objection?
I want a graph from a credible source. Not the National Association of Realtors. You are Mr. Graph and cannot cite to any graph to support your assertion. You have no credibilty. This is one where you cannot "graph away" because you know that I am right. You know that unlike the 80s, there are not the quantities of assignable mortgages in the market that existed in the 80s. So when you say rising interest rates have no relation on prices and cite to the 80s, you are assuming conditions today are the same as they were in the 80s. Was there $4.6 trillion of wealth lost in the 80s? You are an amateur realtor with no economic bankground. Tell everyone how long you have been a used car, I mean, realtor.
ReplyDeleteSo first you go with the create- another-fake-anon-produce-the-graph-argument and then when that fails you go ad hominem and call me a realtor? Nice.
ReplyDeleteIts clear that there is no convincing you of something you are not yet ready to believe. Thats fine. Just remember this discussion when years from now you are sitting there looking at 8.5% interest rates with 5% inflation and wondering why home prices have not gone down accordingly.
Its also evident that you have a compelling need to get the last word in, and in this regard, I relent. You will not hear from me on this thread again.
So here you go my friend. Now is your chance to rage, absolutely rage against my nonsense and suspect motives by blasting me with more fake arguments, ad hominems etc. Go nuts!
I wiped out another realtor from a blog. Mission accomplished!
ReplyDelete