Barry does a great job at laying out how this crisis evolved.
Barry does a great job at laying out how this crisis evolved.
On Matrix I have long been critical of the NAR’s efforts to spin the market as positive no matter what is happening (there is an alternative to negative spin – it’s called neutral). NAR is a repository of great information so I am not sure what they are afraid of. They don’t make the market. This tactic really represents old school thinking.
I have wanted to visually show how this was done, but alas it never got, well…done. I don’t grab other posts but this time I need to make an exception since it was so brilliantly done (hat tip to reader RentinginNJ, a fan of NJ RE Report via Big Picture). Both Jim Bednar’s New Jersey RE Report and Barry Ritholtz’s The Big Picture are heavily trafficked go to blogs for real estate info.
Although Barry makes an interesting point, I’d have to say I see no real change in NAR’s orientation in delivery of information to the press other than the latest release. One slight negative release doesn’t show a trend (3 data points to make a trent I am told). In fact, the press release titles for the prior two months had nothing to do with the data in their reports.
Each press release statement pertains to the corresponding number in the above chart.
“There’s no question there is a strong demand for housing from a growing population.” -David Lereah, NAR Chief Economist
“For the foreseeable future, the demand for homes will continue to outstrip supply” -Al Mansell, NAR President
“We’ve been expecting sales to remain at historically high levels, but this performance underscores the value of housing as an investment and the importance of homeownership in fulfilling the American dream.” -David Lereah, NAR Chief Economist
“We are returning to more balanced markets between home buyers and sellers… We feel confident that housing is landing softly as rates continue to rise.” -David Lereah, NAR Chief Economist
“This is part of the market adjustment we’ve been discussing, with a soft landing in sight for the housing sector. The level of home sales activity is now at a sustainable level. Overall fundamentals remain solid…” -David Lereah, NAR Chief Economist
“Higher interest rates are slowing home sales, but we see this as another sign of a soft landing for the housing sector which remains at historically high levels.” -David Lereah, NAR Chief Economist “After five years of booming sales, we are now experiencing normal market conditions across most of the country… most owners can expect steadier gains in home values for the foreseeable future.” -Thomas M. Stevens, NAR President
“Over the last three months home sales have held in a narrow range, easing to a level that is near our annual projection, which tells us the market is stabilizing” -David Lereah, NAR Chief Economist
“Now sellers in many areas of the country are pricing to reflect current market realities. As a result, there could be some lift to home sales, but it’ll likely take some months for price appreciation to rise.” -David Lereah, NAR Chief Economist
Existing-home sales stabilized at a sustainable pace in August -NAR
“…the worst is behind us as far as a market correction — this is likely the trough for sales. When consumers recognize that home sales are stabilizing, we’ll see the buyers who’ve been on the sidelines get back into the market” -David Lereah, NAR Chief Economist
“It looks like we’re moving beyond the low for the housing cycle last fall, and buyers are responding to historically low interest rates and competitive pricing by home sellers. In addition, a tightening inventory of homes on the market is supporting prices.” -David Lereah, NAR Chief Economist
“Fundamentals have improved in the housing market and buyers see a window now with historically-low mortgage interest rates and competitive pricing by sellers,” -David Lereah, NAR Chief Economist
“We also may be seeing some losses as a result of the subprime fallout. However, this is masking improved fundamentals in the housing market, with lower mortgage interest rates and motivated sellers.” -David Lereah, NAR Chief Economist
“Buyers who’ve been on the sidelines may want to take a closer look at current conditions in their area – if they wait for sales to rise, their choices and negotiating position won’t be as good as they are now.” -Pat V. Combs, NAR President
“The rise in sales and prices in the Northeast region on a fairly consistent basis in recent months is promising because this was the first region that underwent sales and price weakness after the boom. Now, it appears that it will be the first region to climb back, indicating that other regions could follow a similar path.” -Lawrence Yun, NAR Chief Economist
“The unusual disruptions in the mortgage market, including a significant rise in jumbo loan rates, resulted in a fairly high number of postponed or cancelled sales…Once we get through these disruptions, we’ll get a better sense of where the actual market is in late fall as conditions begin to normalize,” -Lawrence Yun, NAR Chief Economist
“Existing-Home Sales Rise in November, Market Likely Stabilizing” -NAR
“Home sales remain weak despite improved affordability conditions in many parts of the country, but we could get a quick boost to the market if loan limits are raised in combination with the bold cut in the Fed funds rate,” -Lawrence Yun, NAR Chief Economist
Existing-Home Sales to Stablize Before Upturn in Second Half of 2008 -NAR
With 4 kids, 3 businesses, the Yankees and a lot of things going on in between, I still wonder why I haven’t been reading as many books as I used to. My wife is a voracious book reader, but over the past few years, I haven’t kept pace.
I took on this self-loathing view point after attending Daniel Gross‘ book launch last night for Pop! Why bubbles are good for the economy. I spoke with him at his book launch party last night as well as met Barry Ritholtz, who, along with Dan, are among the smartest and most acessible writers and interpreters of economics out there.
I read a large portion of Dan’s new book on my train commute home. Really good…enjoyable. When I got home, I decided to take a look at my magazine and newspaper subscription list and I realized how large it has become. To examine my list…
I am not including papers I pick up for my commute home including the NY Post, NY Sun, NY Daily News or Newsday, or count copies of Metro or AM New York for the subway.
I am not includimg the 119 rss feeds coming into my bloglines account, the email blasts I subscribe to, nor the sites like Slate, Salon, CNN/Money, Curbed, TheStreet.com, Inman, WashingtonPost.com, SFGate.com (SF Chronicle), Bankrate.com, PIMCO, Forbes.com, Seeking Alpha and quite a few others I like to check in with every day.
Now there are a few on the list that are simply impossible to read everything or I choose not to (namely the New Yorker and The Economist because they are weekly and chock full of stories although I admit I look at every cartoon in the New Yorker.) I definitely don’t read all of these publications front to back. I included non-real estate subscriptions because, well, you never know.
Its apparent that anyone can get so involved in reading news, it could become a full time job. Where’s Evelyn Wood when I need her?
I feel like a sieve, with a slew of these publications going through my brain and the parts that stick, end up in my blog and in my understanding of the real estate market, the economy, and of course, make intelligent picks for next year’s March Madness tourney.
I suspect I am missing a few but don’t have time to check…too many to things to read. Here are the subscriptions I can think of and these are in no particular order.
new york times
wall street journal
new york observer
new york magazine
new york living
time out new york
the real deal
hemmings muscle car
real estate weekly
2 local weekly newspapers
The quantity has cut into my book reading time, that’s for sure. Its a good thing I have invented more time in the day (no time to explain). Suggestions for additions are welcome (no lesson learned from this exercise).
Hey did you hear about that new magazine that came out the other day….?
UPDATE: Here’s a few I forgot to mention:
new york home
real estate valuation magazine
As the character Gordon Gekko (not to be confused with the Geico version) said in the one of my favorite movie speeches in the 1987 film Wall Street, “Greed is Good” (I have been in the apartment Charlie Sheen “dumped.”)
The point is, ladies and gentlemen, that: Greed, for lack of a better word, is good. Greed is right; greed works. Greed clarifies, cuts through, and captures the essence of the evolutionary spirit. Greed, in all of its forms, greed for life, for money, for love, knowledge — has marked the upward surge of mankind and greed, you mark my words — will save not only Teldar Paper but that other malfunctioning corporation called the USA.
It seems that bubbles are good too. Daniel Gross, one of my favorite econ columnists in Slate and the New York Times wrote a book with an intriguing title and comic book cover design Pop! Why Bubbles Are Great For The Economy.
The book is available tomorrow. Click the widget above.
The concept is that the frenzy of irrational economic enthusiasm lays the groundwork for sober-minded opportunities, growth, and innovation. Of course that means ignoring the pain and suffering of individuals, but it
peeks piques my curiousity enough to buy the book. Much of the bubble discussion out of the housing sector to date has been an us vs them, real estate industrial complex v. renters, etc. conspiracy theory.
Getting Graphic is a semi-sort-of-irregular collection of our favorite BIG real estate-related chart(s).
Barry Ritholtz , who runs one of the best and most essential econ blogs out there: Big Picture, has a hilarious post (ok, more like humorous to people not excited about numbers in general).
The chart pokes fun at the trade group, National Association of Home Builders’ suggestion that sentiment has leveled off and we have bottomed out.
When you see the way Barry has presented it, common sense tells you there is a high probability that its like a Seinfeld episode (translation: its about nothing).
Incidentally, this seems to correlate with speculation that national inventory has leveled off and builders stocks have begun to rise as there is an assumption that the worst is behind us.
Records are abound lately:
Yesterday at 7:46am EST, the U.S. POPClock Projection reached 300,000,000 as the estimated US population.
(in fact 12 new borns just now started screaming)
200,000,000 was passed in 1967 – population doubled in 39 years. I find it amazing that the population was 76,000,000 in 1900 – seems huge to me for that period of time.
The idea of a growing population seems to be favorable, especially with growing immigration and their influence on the demand for housing. Harvard’s Joint Center for Housing Studies released their seminal The State of the Nation’s Housing 2006 [JCHS] early this year which projected favorable demand for housing over the next 10 years.
Over the longer term, household growth is expected to accelerate from about 12.6 million over the past ten years to 14.6 million over the next ten. When combined with projected income gains and a rising tide of wealth, strengthening demand should lift housing production and investment to new highs.
In combination with the 300,00,000 number, Forbes did a study on The Average American: 1967 And Today [Forbes] referring to Mr. & Mrs. Median. The Median’s can’t be seen as average can they?
Mr. and Mrs. Median’s $46,326 in annual income is 32% more than their mid-’60s counterparts, even when adjusted for inflation, and 13% more than those at the median in the economic boom year of 1985. And thanks to ballooning real estate values, average household net worth has increased even faster. The typical American household has a net worth of $465,970, up 83% from 1965, 60% from 1985 and 35% from 1995.
Here’s a great summary of the Forbes article stats in Big Picture by Barry Ritholtz who also comments below.
Although we have more, apparently we are not very happy about it. We suffer from Permanent Income Theory.
Milton Friedman dubbed “Permanent Income Theory,” which assumes that people measure where they are relative to where they expected to be a few years ago. They don’t care a bit what the average income was four decades ago.
“If you expect a 3% rise in income and you get 2.5%, you’re disappointed,” says Ken Goldstein, an economist at the Conference Board, a private research group in New York.
And today, the Dow Jones Industrial Average exceeded 12,000 for the first time breaking the October Jinx of 1929, 1987, 1978, 1979, 1989 and 1997.
However, the new high-water mark also was achieved at a time when many economic reports have pointed to slower growth, and suggested to some analysts that a market correction might be more appropriate. For Barry Ritholtz, president of Ritholtz Capital Partners, the market has been on “a mission to get to 12,000 no matter what the data has been saying.” “But I think there is a disconnect between the market and economic reality,” when you bear in mind that earnings are at their cyclical peak and the economy is slowing.
A recap: There are a lot of us, we are making more money, the stock market is active yet we are unhappy. I must need to buy a new house.
If you are in a bad mood or are looking to stop drinking coffee, here’s a scary summary of the national housing market by [Comstock Partners](http://www.comstockfunds.com/Commstock via WSJ pointed out by Barry Riholz of BigPicture. I hate to simply present the list again but is a summary of the state of the housing market based on national statistics thats a little disturbing. Each item on its own can be explained but the combination paints a more powerful picture.
Whats important to realize is that the stats are national and represents the worst elements of different markets. You can pick out specific examples of stats on the list that are hyped but even after doing that, the numbers presented in total are a concern (are you reading this Ben?) and builds the argument that we are in the midst of a hard landing.
Warning: viewer discretion is advised (its nationally orientated so it doesn’t apply to all markets).
Maybe I will get that cup of coffee.
The stats for new home construction showed more brisk activity than was expected [WSJ].
According to the Commerce Department:
Housing starts increased 5.3% to a seasonally adjusted annual rate of 2.123 million units.
Permits for future building rose 2.5% last month to a 2.155 million annual rate.
“I was a little surprised by the strength” of new construction, said David Seiders, chief economist at the National Association of Home Builders. However, he said much of the activity was tied to new housing permits and sales orders placed several months ago.
NAHB reports that builders are becoming more dependent on sales incentives versus last spring.
This seems to be a contradiction. I had a prominent real estate broker call me yesterday after this report was released and tell me her listings were not selling as quickly as before and yet the NAHB stats were so positive.
Builders know how to build and they keep doing it ’till they can’t build anymore.
So new construction stats do not immediately relate to housing demand.
Barry Ritholtz of The Big Picture, one of my favorite blogs, agrees. In his post Howz Real Estate Doin’? he concludes:
Bottom line: New home starts and permit apps are not a leading indicator of the housing cycle.
The Fed increased the Federal Funds rate to 4.25% [WSJ], the 13th increased since June 2004. However, for the first time since 2002, it omitted the word “accommodative” which means that rates are nearing the point where they neither stimulate or deter economic growth. The less restrictive wording will give Bernanke. Greenspan’s replacement, a little more flexibility.
For housing: If inflation is in check, then mortgage rates may be less likely to move a whole lot higher making the transition to a less frenzied housing market more attainable.
However, its not clear whether inflation really is in check. Barry Ritholtz of the Maxim Group and webmaster of Big Picture clearly disagrees with this assessment:
“Core inflation has stayed relatively low in recent months and longer-term inflation expectations remain contained.” Quite frankly, we do not believe them. We know that beyond the rises in food and energy prices, nearly everything — from healthcare to building materials to education costs to insurance to commodities — costs more. And gold, the world’s best inflation indicator, is well over $500 per ounce. Where ever we look, we see evidence that prices have limited stability and an upward bias.”
Barry adds in a comment:
Microeconomics concerns things that economists are specifically wrong about, while macroeconomics concerns things economists are wrong about generally.” – P.J. O’Rourke
The WSJ summarizes:
“Overall inflation recently topped 4%, at an annual rate, because of soaring energy prices. Excluding food and energy, it is only about 2%, but Fed officials worry that higher energy prices will eventually lead to higher wage demands and prices for other goods and services. Although gasoline prices have fallen back from their levels reached just after Hurricane Katrina struck the Gulf Coast, natural-gas prices have climbed, hitting a record yesterday as cold weather blanketed the Northeast.”
Here’s a good summary article by columnist Andrew Cassel about the conflicting statistics that have been released this week called The Economy | Volatility telling us something? [Philadelphia Enquirer] It lays out all the arguments pro and con. He says:
I tell you, some weeks you risk whiplash just reading the economic news.
“Such discordance isn’t uncommon in economic statistics-gathering. Data can appear out of whack for a month or two because of reporting problems, or because something – a holiday, say, or bad weather – disrupts the normal flow of sales for a few weeks.
That’s why economists like to focus on longer-term trends, averaging changes over three months, six months or a year.”
The increased volatility, he suggests, could either mean that buyers are rushing to lock in on low mortgage rates so this could be a short term improvement or this is the sign of something far more severe since housing is connected to a large portion of the economy.
For a detailed analysis on why the New Home Sales data is statistically flawed, then a must read is Barry Ritholtz’s Big Picture blog post: New Home Sales Data: Don’t rely On It Either
It seems to me that everyone is so honed in on anything that has to do with housing, that every month we go through this scenario, trying to recognize the inner meaning between the existing home sales stats and the new-home sales stats that we don’t know which end is up. I for one have been very leery of these stats for a while, especially when reviewing them on a month by month basis. New home sales are a small sample size and existing home sales are about 60 days behind the market. The two mixed together make for strange results.