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Back in January, David Lereah, former chief economist for the National Association of Realtors, came clean with the Wall Street Journal. It appeared to be more of a timed interview to coincide with the start of his new venture.

Mr. Lereah, who says he left NAR voluntarily, says he was pressured by executives to issue optimistic forecasts — then was left to shoulder the blame when things went sour. “I was there for seven years doing everything they wanted me to,” he said, looking out his window to his tree-filled yard in this Washington suburb.

Of course his successor, Lawrence Yun, who started off with the same hard core spin, but a few months into the credit crunch pulled back from his wildly optimistic ways which was, for lack of a better word, refreshing (relatively speaking).

Coverage after the WSJ article was here, here, here and here, etc. You get the picture.

The spin from NAR was excessive and offensive during his reign – so much so he inspired blogs like David LereahWatch and kept the blogosphere full of content for many years. I remember thinking the disconnect of his press releases during his reign was significant and infuriating.

I got to meet him in the green room before we were both on a CNBC special in 2004 at his height (I was an obviously lesser figure in the program) yet he seemed embarrassed about his prognostication.

It’s hard to imagine that NAR and Lereah were not acting as a team in the false message delivered in a procession of press releases. Although both have separated ways, NAR and Lereah are still at it.

MarketWatch did a humorous recap of the major forecasting errors provided by Lereah.

So why am I bringing all this up when I said I was tired of the topic of Lereah?

Because I came across a press release today from his new venture Reecon Advisors, Inc. For $495 per year, you can get to hear what Lereah thinks about the housing market – he writes his newsletter from home and has less than 50 subscribers but hopes to get more. Because he is now independent, he will provide an non-biased viewpoint. Ok, doesn’t the very fact that he would say this completely discredit because it infers – he – can – be – bought. Why is now different?

Listen, I don’t fault the guy for trying to make a living. After 7 years of hard core spin, a subsequent apology that confirmed this, mockery by the blogosphere who outed his frequent misdirections, and later disenfranchisement with NAR, who on earth would actually subscribe?

The web is a beautiful thing. You can set up a web site and appear like a big research think tank. Makes your head spin doesn’t it.

Tags: CNBC, Lawrence Yun, David Lereah, NAR, National Association of Realtors

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I am a bit taken aback by the army of real estate marketing gurus and top line real estate agents that are openly talking about the weak housing market as part of their public image.

It does seem to give the real estate brokerage industry more credibility but I have a hard time processing this new market acceptance, perhaps because the hard sell was on prime time for so long. Heck, even Lawrence Yun of NAR has injected less rosy projections into the converation than his predecessor David Lereah would have ever dreamed of.

In fact Doom & Gloom has proved very lucrative for some as of late (they’re all in Davos): Nouriel Roubini (Dr. Doom), Robert Shiller (Irrational Exuberance), Nassim Taleb and others. And I say good for them!

Ben McGrath writes an excellent article and provides a fascinating perspective in the companion podcast about predictions of economic and social collapse.

It’s been completely fascinating to witness the seemingly overnight global change in the financial investment perspective. I am not clear on whether this is a long term change or simply an immediate reaction to everyone’s smaller paycheck.

Yes, Elvis has left the building (in Illinois), but the Boss was at the 50 yard line.

UPDATE: Optimism is the cure for the downturn.

Tags: Robert Shiller, Lawrence Yun, David Lereah

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When I heard the latest NAR existing home sale stats released today, I fought back the urge to ignore them because of the past spin of David Lereah and the fact there is no national housing market, blah, blah, blah.

Here’s the NAR position:

Lawrence Yun, NAR chief economist, said home prices continue to fall significantly. “It appears some buyers are taking advantage of much lower home prices,” he said. “The higher monthly sales gain and falling inventory are steps in the right direction, but the market is still far from normal balanced conditions. Buyers will continue to have an edge over sellers for the foreseeable future.”

Here’s type of coverage on the news release today, which was consistent:

The number of existing homes sold in December rose 6.5% from the previous month, according to a report released Monday, as bargain hunters took advantage of plummeting prices.

The National Association of Realtors said that home sales increased to a seasonally-adjusted, annualized rate of 4.74 million units. That’s up from a revised pace of 4.45 million units sold in November and more than the rate of 4.4 million units projected by a consensus of industry analysts as reported by Briefing.com.

Tim Iacono, a regular contributor to Seeking Alpha, made a great chart trending number of sales and inventory (above). When you read the news coverage and press releases, you don’t get the perspective this chart provides:

• The number of sales are less than half of those in 2005 (blue line).
• The credit crunch that began in the summer of 2007 initiated a new low level of activity, has been remarkably level.
• The positive news of the 6.5% monthly uptick in the number of sales, in the context of post-summer 2007 credit crunch, suggests we may be moving into a lower level of activity.
• Without the surge in west coast foreclosure sales, the levels would likely be far lower.

In other words, this is so not over.

Tags: Lawrence Yun, David Lereah, NAR, National Association of Realtors

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It’s bad enough that the current NAR chief economist has made himself irrelevant by continues to say some crazy things about the housing market:

Two things homebuyers shouldn’t have to worry about is a recession or long-term credit crunch.

Yun, who admits that he has to balance empirical data with a role of advocacy for the housing market, said that while the beginning of 2008 has been weak so far, the second half of the year should see an uptick that could lead to home value growth of more than 20 percent in the next five years. “I think there is enough momentum to bring the buyers back into the market,” Yun said.

His adventures are well chronicled in Lawrence Yun Watch which followed the widely read David Lereah Watch who was his predecessor.

Now we are seeing the former cheerleader for NAR, David Lereah espousing negative views on housing.

David Lereah was the poster boy for all that was wrong with the housing boom. He wasn’t that subtle about spin, or perhaps an organization like his didn’t have the blogosphere to contend with before he came on the scene.

David Lereah moved on to Move and when they experienced problems, moved on to his startup Reecon Advisors, which provides advice to Wall Street. Interesting. Didn’t Wall Street read the newspapers during the housing boom? What advice are they looking for?

I guess the only point to this post is that I find it amazing that someone, who is so smart and articulate, take the dubious path that he took, and still be able to sell books and be paid for advice, which contrasts what he doled out for years with NAR and apparently trained his successor well.

I have so much to learn.

Tags: Lawrence Yun, David Lereah

3 Comments

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.

View original post on New Jersey RE Report

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.

1. “There’s no question there is a strong demand for housing from a growing population.” -David Lereah, NAR Chief Economist

2. “For the foreseeable future, the demand for homes will continue to outstrip supply” -Al Mansell, NAR President

3. “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

4. “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

5. “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

6. “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

7. “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

8. “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

9. Existing-home sales stabilized at a sustainable pace in August -NAR

10. “…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

11. “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

12. “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

13. “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

14. “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

15. “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

16. “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

17. “Existing-Home Sales Rise in November, Market Likely Stabilizing” -NAR

18. “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

19. Existing-Home Sales to Stablize Before Upturn in Second Half of 2008 -NAR

Tags: Lawrence Yun, Barry Ritholtz, David Lereah, Sub-Prime, NAR, National Association of Realtors

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In the New York Times article today Reports Suggest Broader Losses From Mortgages indicates that employment levels will be impacted from the job losses associated with problems in the mortgage industry. So now we have, lower levels of mortgage production, lower levels of construction and lower levels of consumer spending.

I guess thats why federal funds futures are indicating a 70% probability that the Fed will cut rates at their next meeting by 25 basis points.

Since August, Lawrence Yun, Chief Economist of the National Association of Realtors, has kept characterizing the mortgage and credit market problems as temporary. Every month, as the blogosphere continues lament the loss of his predecessor, David Lereah, Mr. Yun has been able to continue the tradition of reality distortion and he does not disappoint.

Temporary? Relative to what? Will mortgage problems continue on forever? Of course not. Merrill Lynch reported an $8B loss due to mortgage related problems today. National lenders are having difficulty selling paper to the secondary market investors. Will this problem go away in a few months? I don’t see how.

If we relied on Mr. Yun’s use of the word temporary and heeded his advice back in August and September, credit market issues would have long been resolved. For next month, here are some alternatives to the word temporary. I vote for fugacious.

I have long lamented how NAR has missed its golden opportunity to gain the trust of the consumer as being the authority on the housing market, despite the fact that they are a trade group. Rather than leveraging the wealth of information at their disposal, they provided comments like this:

“Mortgage problems were peaking back in August when many of the September closings were being negotiated, and that slowed sales notably in higher priced areas that rely more on jumbo loans,” he said. “The good news is that mortgage availability has markedly improved in recent weeks with interest rates on jumbo loans falling, and more people are applying for safer and conforming FHA mortgage products.

The quote attempts to parse out problems with the mortgage markets from the timing of contract and closing dates. Elements of the statement are correct, but out of context, and ultimately paint an inaccurate picture.

Speaking of disconnect, did you hear George Carlin’s comments on The View about the fires in southern California regarding people losing their homes?

Tags: Jumbo Mortgage, Conforming Mortgage, FHA, Lawrence Yun, Pending Home Sale Index, David Lereah, PHSI, NAR, National Association of Realtors

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On Monday NAR released their Existing Home Sales stats for July 2007 slipped only 0.2% from the same period last year.

Lawrence Yun, NAR senior economist, said the market is holding on despite temporary mortgage disruptions. “Home sales probably would be rising in the absence of the mortgage liquidity issues of the past two months,” he said. “Some buyers with contracts have been scrambling when loan commitments did not materialize at the last moment, while other potential buyers are simply waiting for the mortgage market to stabilize.

I believe this could fall under normative economic theory (just a wild guess…on my part). When the data doesn’t match what the author wants it say, the author says what the author wants to say anyway. Another word for this is known as “Fogging.”

Other examples…

June 2007 Release for Existing Home Sales – Psychological factors and people doubling up in their houses:

“I think psychological factors are currently the biggest drag on the housing market, in addition to a disruption from tighter credit for subprime borrowers,” he said. “Household formation has slowed dramatically since late 2006, implying that many people are doubling-up – they’re adding roommates or moving in with parents.”

April 2007 Release for Existing Home Sales – The weather is to blame:

David Lereah, NAR’s chief economist, expected the drop. “For the last couple months we’ve been expecting a weather ‘hit’ on home sales finalized in March, but looking at overall activity in the first quarter we see that existing home sales averaged 6.41 million — a figure that is moderately higher than the sales pace during the second half of 2006,” he said. “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.”

Ok, back to the August release…
The reason Yun gave as to why home sales prices didn’t rise in August… was due to the credit crunch. However, the July closings in this report didn’t include sales during or after the credit crunch began in mid-July because these sales went to contract in June or early July. In other words, the statement applied to conditions not evident in the report data.

Its an interesting argment but made subject to an error in time slicing. The comment would have made more sense next month. Why is this sort of thing said nearly every month? Its not fair to the consumer.

Tags: Lawrence Yun, David Lereah, Sub-Prime, NAR, National Association of Realtors

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Besides having a lot of admiration for the never ending contrarian ideas of Stephen J. Dubner, a la Freakonomics, it provides a great excuse to use “Freakin'” in public and not get scolded or lose my temper.

He gathered 5 real estate veterans to get their take on the questions: Is it finally time to believe in the housing bubble? And how much should the average American care?

He solicited comments from:

Robert Shiller: author of Irrational Exuberance and one of my economics’ heroes, who seems to be more optomistic than his introductions before various interviews would seem to suggest:

It is not clear whether the boom has come to an end; there is still investor enthusiasm out there.

Lawrence Yun: the new chief economist for NAR, who has taken the torch from his predecessor by dissappointingly finding obscure positive elements to expound upon that conflict with each other.

All real estate is local, and there are many local variations…The national median price was 1.1% lower in the second quarter of 2007 than its comparable period the year before….If people want to call the 1% price decline a bubble collapse — well, everyone has an opinion

David Lereah: the former NAR chief economist who gave this job title a bad name. He missed the opportunity to make NAR a trusted resource during the housing boom and post-housing boom periods, re-inventing phrases like “housing expansion” and balloons. A number of my agent colleagues were embarrassed by the things that he said during his tenure.

Bubble is the wrong imagery for today’s housing markets. Bubbles inevitably “pop.” A more useful image for the housing markets is a balloon. Balloons expand and deflate.

Barbara Corcoran: the former head of one NYC’s largest brokerage firms that bears her name. She was a brilliant marketer who really needs to re-connect with the market today. I am thinking that what worked 10 years ago doesn’t work today because I doubt that people believe she is running around the country snapping up property like picking apples from trees. But then again, I don’t understand marketing.

I’m yahoo-ing, low-bidding, and snatching up deals wherever I can find them…I’m grabbing as many over-priced, over-stuffed, and over-rated homes as I can get my greedy little hands on.

Aviv Nevo: one of the authors of the controversial Madison FSBO article who raised a lot of eyebrows with the study for his sharp insight, but also its limited applicability to the national market (not his fault at all). BTW, have you been to Madison lately? and is Jocko’s Rocketship near the football stadium still there?

I don’t know if it is time to believe in a housing bubble, and, frankly, I am not sure the average American should care.

Amir Korangy: founder and publisher of The Real Deal, to whom I have a particular bias, being in their publication a number of times, but for good reason: its a go to resource that is growing fast and has seemingly bigger than a Manhattan White Pages (8 pages of Millers, last time I checked).

Real estate prices are a local phenomenon based on employment, industry, and other factors including climate, quality of education, cost of living, immigration, and crime. Therefore, if the concept of a national housing market is ultimately a false construct, there simply cannot be a national housing bubble.

So why am I rambling about all these commentators in one column by a really smart contrarian economist? Because it speaks volumes about the residential housing market and how we see (or don’t see) it. The commentary represents a world filled with mixed signals, spin (cherry picking), more spin, limited applicability, out in left field silliness and rational thought, which leaves us freakin’ hungry to read more.

Oh, and by the way, I don’t think there was a quorum on the state of housing here.

Tags: Robert Shiller, Lawrence Yun, David Lereah, Amir Korangy, Barbara Corcoran, Corcoran

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The NAR says consumer psychology is to blame.

“Homebuyers have been getting mixed signals about the housing market, which is causing some of them to hesitate”

Lawrence Yun, NAR senior economist, who has taken torch from controversial former chief economist David Lereah, said some consumers are uncertain (yes, 1/3 fewer sales):

“Home buyers have been getting mixed signals about the housing market, which is causing some of them to hesitate,” he said. “Mortgage interest rates have risen recently, and tightening lending standards are continuing to hamper sales, but fewer risky loans will put the market on a healthier path. Although general buying conditions remain favorable for long-term home buyers, it appears some buyers are looking for more signs of stability before they have enough confidence to make an offer.”

Ok. Lun has moved beyond blaming the weather to blaming buyers. This strikes me as odd.

Lets look at the use of the word value.

The most probable price (in terms of money) which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby: the buyer and seller are typically motivated; both parties are well informed or well advised, and acting in what they consider their best interests; a reasonable time is allowed for exposure in the open market; payment is made in terms of cash in United States dollars or in terms of financial arrangements comparable thereto; and the price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale.

Value is steeped in consumer psychology. Its about perception about a future benefit.

Consumer psychology is the study of how people relate to the products and services that they purchase or use.

So the measurement of how people relate to the housing market, is the value they place on it. So value is part psychology. When someone makes an offer on a house, its the amount they feel is justified and correlated to their perception of the benefit of ownership in the future (phew!).

In other words, Lun is blaming the value buyers place on the housing market as keeping them from buying them. Actually, its also a tired reference to blaming the media for housings’ troubles.

So a buyer won’t buy because the value they see in the property isn’t enough to make them want to buy. Isn’t this a circular reference?

or to put it another way…huh?

Tags: Lawrence Yun, David Lereah, NAR, National Association of Realtors

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Its been a quite a 7-year ride for the National Association of Realtors and their Chief Economist David Lereah. That era is now over and he is resigning to take another position. I wish him well and I hope he reconsiders his modus operandi.

The US housing market went through the largest property boom in history and is now weakening. He did what he thought he was supposed to do: promote his trade organization through market statistics and commentary. Unfortunately, his style did not translate well when market conditions weakened. He became a cheerleader rather than an insight provider.
I met him in the green room before a CNBC appearance and he seemed like a nice guy, but almost apologetic to the optimism he was pitching. He didn’t seem to buy into the message either.

I saw the movie “Thank you for smoking” the other day and actually pictured Lereah in the staring role. See the movie and you’ll understand what I mean.

The blogosphere had a field day with the softballs that were served up on a regular basis (ie David Lereah Watch). Yet the spin never abated.

One thing I never got over through all this was the loss of opportunity for the NAR to gain credibility with consumers. Instead of spinning so blatently, NAR could have taken the torch and become the market leaders for real estate expertise. The old school of thought that if you say it often enough and loud enough, people start to believe prevailed.

The excess spin that was generated seemed to be fully embraced by a large portion of the NAR membership but really served to further distance the trade group from the public. The blogosphere provided a challenge to the old rules of publicity that the organization was not able to adapt to.

I hope the incoming chief economist has learned from this experience and will make changes in the way information is disseminated to the public. Hopefully its less self-serving.

NAR has a treasure trove a great information.

Tags: CNBC, David Lereah, Realtor.com, NAR, National Association of Realtors

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A broker friend of mine faxed page 45 of the March issue of Realtor Magazine “The List Issue 2007” today which recommended 5 real estate blogs to their membership in the print and online versions of the magazine. Matrix was one of the five.

The list also included Mortgage Fraud Blog, Real Estate Bloggers and Real Estate Tomato, all of which are already in my blogroll. Their PR blog was also included in the list.

This often updated blog aims to be an independent resource on the real estate market, focusing on the latest local, national, and international industry news. Jonathan Miller, cofounder of two Manhattan real estate appraisal companies, said he created the blog in 2005 to feed the nation’s voracious appetite for all things real estate. He says he’s able to maintain an impartial tone in his blog thanks to his appraisal background.

Considering the (warranted) terse treatment I have given David Lereah (chief economist of NAR) lately, I am impressed that NAR would select my blog Matrix for the list and use the words independent and impartial in their description…two of my favorite words in the whole world.

Tags: David Lereah, NAR, National Association of Realtors

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Since I am on a David Lereah roll, the Chief Economist for the National Association of Realtors has a new book out. Its called:

All Real Estate Is Local: What You Need to Know to Profit in Real Estate – in a Buyer’s and a Seller’s Market

The title of his last book was:

Are You Missing the Real Estate Boom?: The Boom Will Not Bust and Why Property Values Will Continue to Climb Through the End of the Decade – And How to Profit From Them

And that cover was tweaked as the market changed.

Is this really worth reading?

Tags: David Lereah, NAR, National Association of Realtors

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