PBS Interview with David Lereah

David Lereah [ my nemesis ] is the cheif economist for the National Association of Realtors was interviewed on PBS by Gwen Iffill.

GWEN IFILL: For months, economists and homeowners have been on the hunt for any sign that the nation's robust housing boom may be going bust. This has week has brought mixed news.

The Commerce Department reported today sales of new homes rose a record 13 percent in October, but yesterday, the National Association of Realtors reported sales of previously owned homes fell by nearly 3 percent in the same period. What to make of all of this? For help, we turn to David Lereah, the chief economist for the National Association of Realtors.

For help?. Lereah is biased. Where is the counter argument? We need a debate. Get Ben Jones' on NewsHour.

GWEN IFILL: Was there ever such a thing as a housing bubble?

DAVID LEREAH: I don't like to use the word "bubble" because bubbles burst.

GWEN IFILL: Exactly.

DAVID LEREAH: Balloons don't burst. You can put air in a balloon and it can expand or you can deflate a balloon, where air comes out. So if you're looking at different metro markets around this country that got real hot over the last four years, I like to use the imagery of balloons because they're getting hot. You're putting more air into those balloons. The prices are going up. But now air can come out of the balloon rather than the balloon popping.

GWEN IFILL: So we're hearing a hissing sound rather than a pop.

DAVID LEREAH: I think that's probably the best analogy to use right now.

Ifill says "Exactly." How about some tough questions? Or are you just going to agree with Lererah?

GWEN IFILL: If you're an average home buyer for whom owning a home is your major investment you'll make in your own life, you look at these numbers and you're trying to decide should I be selling now, should I be buying now or should I just stay out of it, what?

DAVID LEREAH: Well, if I'm not a homeowner and I'm thinking of purchasing a home, I would always purchase the home. Be a real estate owner; own property and you'll benefit from equity gains and wealth gains over the years. Have a long-term horizon.

If I'm looking to sell right now, you know, it's still a seller's market but it's starting to transition to a buyer's market so it's a good time to sell if you want to right now.

If I'm a buyer I'm still looking at historically low mortgage rates; even though mortgage rates have risen somewhat, they're still hovering around 6.25 percent. That's historically low. That's low-cost financing. I would take advantage of that.

Lereah says "Well, if I'm not a homeowner and I'm thinking of purchasing a home, I would always purchase the home." Bad idea. Of course he is from the Realtors Association and 'cannot' say that in the bubble markets he would consider holding off purchasing a home.

2006 mortgage conforming limit rises to $417,000

"The conforming limit will rise to $417,000 in 2006, an increase of almost 16 percent over the 2005 limit of $359,650. That's the limit for single-family homes in the continental United States."

"Conforming mortgages are home loans that conform to standards set by Fannie Mae and Freddie Mac, the mortgage giants that keep money flowing by buying home loans from lenders and selling them as investments. The conforming limit marks the maximum loan size that Fannie. ( Bankrate.com)"

Certainly, the housingheads will be cheering this decision.

It's the Inventory Stupid!

Not convinced that the bubble is about to burst?

Calculated Risk posted this:

"The 496,000 units of inventory is the all time record for new houses for sale. On a months of supply basis, inventory is at a reasonable level.

This is a very strong report. The pronouncements of the demise of the housing market now appear premature."

It's the inventory stupid! Look at the inventory flooding the market in the bubble markets.

Note: Calculated Risk is certainly not stupid. Calculated Risk has many valuable insights and I am a dedicated reader of his blog. The phrase is priceless in this case.

New Home Sales Shoot Up?

The Commerce Department reported that:

Sales of new homes soared at a record pace in October in what could be a last hurrah for the booming housing market. The Commerce Department said that sales of new single-family homes shot up by 13 percent last month, the biggest one-month gain in more than 12 years."

"The increase confounded analysts who had been predicting that new home sales would decline by 1.8 percent. The rise in new home sales was accompanied by an increase in prices, with the median price increasing by 1.6 percent from September to $231,300 in October. ( Yahoo)

So what does this mean? Experts are 'confounded.'

One poster on The Housing Bubble Blog wrote "You, know I'm not totally convinced that this boom has completely run its course."

Another poster [ pchander100 ] wrote "I am very suspicious of the new home sales numbers. In California, new home builders are offering incentives to sell homes, while the inventory is piling-up. Yet today's numbers show a 49 percent increase. These numbers are rigged."

Ben Jones' had this to say "Keep in mind the incentives the HB's have been offering, like the Sacramento story yesterdayrevealed. Thesee guys have a lot of margin in their pricing so they can hold a fire sale."

There is a large degree of error to these commerce reports "This is 13.0 percent ( ±17.7%)* above the revised September rate of 1,260,000 and is 9.0 percent (±18.2%)* above the October 2004 estimate of 1,306,000." The "A 2.5 percent (±3.2%) above appears in the text, this indicates the range (-0.7 to +5.7 percent) in which the actual percent change is likely to have occurred. All ranges given for percent changes are 90 percent confidence intervals and account only for sampling variability ( Commerce Department Report )"

Read little into this report. The 13 percentage increase likely reflects a large degree of error combined with increased incentives from homebuilders ( who have been 'taking away' sales from existing homes ).

Great Story On Another F*cked Borrower

Check out the Post "I need to do a refi cash-out to get money to pay my mortgage." . Amazing the stories that are coming out of the lending business.

Pop Goes the Bubble

US External Debt and The Bubble

In the book The United States as a Debtor Nation it says the following:

More fundamentally, even if foreign investors give the United States an unlimited length of rope by continuing to finance ever-greater buildups in US external liabilities, there is a problem of long-term burden for the US economy as it becomes increasingly indebted abroad. To the extent that the borrowing is primarily directed not towards financing investment but rather toward financing high levels of private consumption and government dissaving, the accumulation of foreign debt amounts to mortgaging the country's economic future. Eventually, there will be a price to pay in the form of a major terms of trade loss as the external debt is serviced. This will reduce the real standard of living of US citizens - many of them of the next generation- from levels otherwise attained as real consumption is eroded through higher import prices. Injudicious, and perhaps inequitable, deferral of the adjustment burden into distant future is a fundamental reason to address the external deficit even if a sharp break in confidence and a hard landing are considered unlikely.

The housing bubble is a significant contributing factor in the ever growing amount of US external liabilities. Mortgage debt is being bought by foreigners. Furthermore, the housing bubble has allowed a huge amount of home equity extraction, which has fueled strong consumer spending. A significant portion of this consumer spending is being spent on imported products. All this increases US external liabilities.

Unsustainable.

Jim Kunstler's Post

Check out Jim Kunstler's Season's Greeting Post . Sure sometimes Kunstler get the facts wrong and is overly dire; but makes solid points.

60 Minutes Piece on McMansions

Here is the link to the story 'Living Large'. Read it.

Ads on Housing Bubble Blogs

About a month ago Ben Jones over at The Housing Bubble added Google Ads to his blog. Some of these ads are from companies that are in real estate or mortgage lending.

One reader critical of The Housing Bubble Blog set up this blog. On it the reader writes:

This blog is dedicated to the memory of Ben Jones, the "freelance writer" who posts thehousingubble2.com which is sponsored by the real estate biz. Or, more accurately, the memory of what is left of Mr. Jones's credibility. We posted to Ben's blog and he quickly deleted our simple and respectful question: "What's with all the links to real estate agents, lenders and other bubble heads?" So, Ben, we're giving you another chance. What's up?

1) Has Ben Jones' Blog lost it's credibility'?

2) Should housing bubble blogs accept Google Ads, if some of them the ads are from companies that are housing cheerleaders?

I want input from my readers on there two important questions.