Matrix Blog

Its getting harder and harder to see the road

[Boston Federal Reserve President Cathy Minehan [MW]](http://www.marketwatch.com/News/Story/Story.aspx?guid=%7BC3A6E113%2D5C56%2D4FB3%2D84DE%2D7F1B075D48C5%7D&dist=newsfinder&siteid=google&keyword=) [said that if housing prices fall [FR]](http://www.bos.frb.org/news/speeches/cem/2006/032006.htm), the impact could be more serious on the economy than generally believed.

Since this speech was held in from the of New England Realtors Conference Monday, I thought it was especially interesting that MarketWatch omitted the presence and comments of David Lereah, the Chief Economist for NAR. [His comments were, as expected, far more optimistic [Boston.com]](http://www.boston.com/news/local/massachusetts/articles/2006/03/20/economists_predict_housing_market_to_bounce_back_in_2007/).

“The solid fundamentals in our economy will keep the real estate expansion alive,” Lereah told about 250 real estate agents at the New England Realtors Conference.

Real estate expansion?

Perhaps thats why MarketWatch ommitted him from the article when covering this event. He has maintained this expansion argument since early fall. It strikes me as very self-serving. See [Fill In The Blank With The Latest Catchphrase: Housing “Expansion” [Matrix]](http://matrix.millersamuel.com/?p=230).

With all that being said, its going to get interesting in the second half of 2006. [Consumer confidence is waning [Conference Board]](http://www.conference-board.org/economics/bci/pressRelease_output.cfm?cid=1).

The decline, which follows four months of gains, suggested to some analysts that [the nation’s economic growth will slow in the year’s second half [Times-Dispatch]](http://www.timesdispatch.com/servlet/Satellite?pagename=RTD%2FMGArticle%2FRTD_BasicArticle&c=MGArticle&cid=1137834839218&path=!business&s=1045855934855). The Conference Board said its Index of Leading Economic Indicators fell 0.2 percent in February, after a revised 0.5 percent rise in January. The January increase had initially been reported at 1.1 percent.

The irony here, is that if the economy weakens (bit not too much) in the second half of 2006 or first half of 2007, mortgage rates could trend downward and actually provide a boost to the housing market.

What name do we give that?

Tags: David Lereah, NAR, National Association of Realtors

2 Comments

According to [Bubblemeter](http://bubblemeter.blogspot.com/2006/02/david-lereahs-new-book-why-real-estate.html), David Lereah, the Chief Economist for the National Association of Realtors (NAR) is changing the title of his real estate book (as seen on Amazon) from:

[Are You Missing the Real Estate Boom?](http://www.amazon.com/gp/product/0385514344/002-6616542-6786408?v=glance&n=283155) to _[Why the Real Estate Boom Will Not Bust.](http://www.amazon.com/gp/product/0385514352/002-6616542-6786408?v=glance&n=283155)_

Notice how the word BOOM is the same size and the graphics are identical? The Walk-through’s [Old Fish In A New Wrapper](http://walkthrough.nytimes.com/?p=366) says the content is the same – Damon Darlin’s post provided a pretty good chuckle.

I had the chance to meet David Lereah in the green room before the taping of [CNBC’s Town Hall: Real Estate Boom](https://www.millersamuel.com/press/view.php?V=1112978480dhDnx) last year. It was me, Suze Orman, Robert Shiller and David Lereah. Surreal to say the least. All very nice I might add. I only had a small appearance – these people were the main characters in this production.

Mr. Lereah has provided a tremendous amount of fodder for the blogosphere, myself included. Up until now, its been the use of language which would seem to be misleading. Now its book titles. This sort of stuff might have worked 5 years ago but not today. People have access to information almost immediately.

Tags: Robert Shiller, CNBC, David Lereah, NAR, National Association of Realtors

Comments Off on Judging A Book By Its Cover: David Lereah Changes Titles

Like many others, I am guilty of using phrases like “the market is returning to more normal levels, to historic norms, etc. After reading this press release from the NAR, I promise to cut back on the use of “normal.”

Apparently the NAR and many others use the same language as I did. The recent press release for NAR [Housing Market to “Normalize” in 2006](http://www.realtor.org/PublicAffairsWeb.nsf/Pages/Jan06Forecast?OpenDocument) provides some standard market descriptions.

WASHINGTON (January 10, 2006) – The key word for the housing market in 2006 is balance, with a return to a more normal rate of price growth, according to the National Association of Realtors®.

David Lereah, NAR’s chief economist, said current trends in the housing sector are healthy. “We don’t need to break a record every year for the housing market to be good – in fact, cooling sales are necessary for the long-term health of this vital sector,” Lereah said. “A modest slowdown in home sales, coupled with improvements in housing inventory, means the market is in the process of normalization. That will help to bring balance between home buyers and sellers, yet sales will remain historically strong.”

But lately I have been thinking…what is normal, let alone historically strong?

I am now of the opinion that “normal” does not exist. Its obsolete, kaput. Lately normal seems more like double digit appreciation.

We are leaving normal right now.

Here are some typical [uses of “normalized” [Google]](http://www.google.com/search?hl=en&lr=&c2coff=1&client=safari&rls=en&q=normalized+housing+market&btnG=Search):

[Hovnanian Sees ‘Normalized’ Market [The Street]](http://www.thestreet.com/markets/realestate/10256360.html)
[Housing outlook remains healthy: Analysts say market to normalize in 2006 [IB Las Vegas]](http://www.inbusinesslasvegas.com/2006/01/06/feature2.html)
[Economic Growth To Slow in Region [Washington Post]](http://www.washingtonpost.com/wp-dyn/content/article/2006/01/05/AR2006010502096.html)

I think what the users of the term really mean is to reassure buyers that the market is still favorable to get into. Its hard to articulate this into one one sentence so the connotation of normal implies balance, less volatility and less risk than seen in a prior period.

Tags: David Lereah, NAR, National Association of Realtors

2 Comments

According to a survey by Real Trends by 48 of the major US real estate firms, [the number of contracts signed this month compared to the same month last year dropped 8% but remained at historical highs [WSJ].](http://online.wsj.com/article/SB113202448355297246.html?mod=home_whats_news_us) Of course this is not necessarily representative since nearly half of the 90 major brokerage firms did not reply to the email survey. Still the story was on page 1 of the Wall Street Journal.

“‘The air is coming out of the balloons,’ says David Lereah, chief economist at the National Association of Realtors, the nation’s leading real-estate trade group.”

“‘We believe the market has peaked,’ says Doug Duncan, chief economist of the Mortgage Bankers Association. Because of brisk sales earlier this year, he expects sales of new and previously occupied homes to reach a record 8.3 million in 2005, up 4% from 2004. But he believes sales will decline 3.5% next year, ending a four-year streak of record-setting totals.

A cooling of the market is likely to be welcomed by the Federal Reserve, which has worried that home prices have become frothy and banks’ mortgage underwriting standards have slipped. For the past few years, fast-rising home prices have allowed people to borrow more against their home equity, fueling a spending boom. Last month, Fed governor Donald Kohn, citing ‘some indications that housing markets are cooling off,’ said this would force consumers, who are not saving any of their current income, to save more to build wealth, restoring balance to the U.S. economy.”

The gist of this WSJ article is the fact that the market is cooling but remains at record levels. In other words, the number of transactions will ease from historic record levels. However, articles on the housing markets like this seem to blend the number of sales with price levels to the average reader. The takeaway here is that the “frenzy” is generally over, the number of sales will ease and that housing prices are not expected to rise as rapidly as years past.

Tags: David Lereah, David Duncan, NAR, National Association of Realtors

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