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Posts Tagged ‘NAR’

From The Garden State: The April 2006 Otteau Report

June 5, 2006 | 12:02 am |

[This monthly market report is provided by Jeffrey Otteau of the Otteau Appraisal Group who also authors a series of widely followed market reports on the New Jersey real estate market. This information is collected from various sources including Boards of Realtors and Multiple Listing Systems in New Jersey.] I have known Jeff for many years and consider him one of the leaders in the real estate appraisal profession. He has taught me a lot about quantitative real estate market analysis over the years. -Jonathan Miller


The New Jersey housing market took a sharp turn for the worse in April as contract-sales activity declined 11% from the prior month and ran 20% below the April 2005 level. At the same time, the inventory of unsold homes on the market increased by nearly 6,000 homes in April and now stands 71% higher than a year ago. That this deterioration comes in the midst of the prime spring selling season when home sales would normally be accelerating provides solid confirmation that the transition to a buyer-controlled market is now complete.

Different from one year ago when buyers were competing with each other by increasing their offering prices, it is now the sellers who find themselves in a scramble to gain the interest of buyers. In most cases, that will require a reduction in asking price to recapture the lost sense-of-urgency which dissipated once inventory increased and home prices ceased their upward spiral.

In examining the market from the perspective of price levels, there are significant disparities. The unsold inventory of homes on the market presently accounts for a 7-month supply (up from 3-months one year ago). This supply is however less for lower priced homes as demonstrated in the table at right (6-months below $600k, 10-months between $600k-$1-million, and 14-months above $1-million). The weakness in the market in excess of $1-million is likely to worsen in coming years due to a combination of economic and demographic trends which will further disadvantage the luxury home market in New Jersey.

Here are the 2005 annual stats as well.

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To The The Economist, The Housing Outlook Bears All

May 30, 2006 | 12:01 am |

The Economist magazine has been bearish on housing since at least 2002. The current issue is no exception.

[My apologies in advance to those who do not have a subscription, but its well worth getting one. -ed]

The current cover story features the image a bear: Despite the rattled markets, the world economy is still relatively strong. Just don’t bet your house on it [The Economist].

They seem to be less concerned with the equities markets and more concerned about the housing market in the US and its global implications.

By borrowing against the surging prices of their homes, American consumers have been able to keep on spending. The housing market is already coming off the boil. If prices merely flatten, the economy could slow sharply as consumer spending and construction are squeezed. If house prices fall as a result of higher bond yields, the American economy could even dip into recession. Less spending and more saving is just what America needs to reduce its current-account deficit, but for American households used to years of plenty it will hurt.

My beef with the Economist, is their love affair with the rental market and its relationship to owner occupied housing. The rental equivalent of owner occupancy, because it is less than the cost of housing, portends certain doom from their view point. This has always struck me as overly simplistic. For many reasons, an investment property is rarely of the same quality or caliber as an owner occupied property and reflects different motivations and buyers. This is the same flawed rationale that includes the rental equivalent of housing in our CPI stats rather than using actual sales stats to represent the housing market. Rental markets have not behaved like the owner occupied markets have during this recent housing boom.

I think its more directly related to affordability. Low mortgage rates have been the key driver of this boom and any other factors are minor in comparison.

In fact their focus on this point has gotten to be the source of some rather dark humor in economics circles. However, the tone of this article seems to back-pedal this 5 year argument a bit, providing both a hard and soft landing scenario.

Here’s a sample of articles for each of the past several years that repeatedly show their view point that the American housing market is headed for a hard landing.

The current bear article seems to be calling for the Fed to continue rate increases because for the world, it is best that America slows today. Later, imbalances will loom even larger. The Economist seems to be saying that inaction by the Fed now would raise the odds significantly that we could see a recession in 2007 as a result.

I contend that the slowing housing market has not been fully represented in the current array of economic stats, and when it does, a recession is already possible without anymore increases by the Fed.

Lets hope that Bernanke doesn’t read The Economist.

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Dusting Off All The Housing Market Cliches

May 23, 2006 | 12:01 am |

In Housing Takes a Deep Breath [BW], Businessweek interviews David Lereah, the Chief Economist of the National Association of Realtors. He is one of the most polarizing figures in real estate today. Despite his title, he’s really an advocate for the Realtor trade group giant and he’s just doing his job, which is certainly fine. But lets recognize what the job actually is and not pretend it is something its not.

Whats grates on my patience is that his view points are out of step with what is really happening. I am not a gloom and doomist but it does the consumer a disservice to lay on so much spin.

The advent of the blog culture has called this practice into question. NAR has missed a tremendous opportunity to gain the public trust during this period of market change.

[tired cliches in bold. I wanted to take the opportunity to point them out only because there were so many in such a short interview -ed]

Now he says the housing market is just taking a breather. “We’re going to drop significantly, but it’s not a balloon bursting,” Lereah says. “This is a soft landing for the housing markets.” He expects total home sales to drop to 6.62 million in 2006, from 7.07 million in 2005. Meanwhile, he thinks prices will continue appreciating this year, but only by around 5%, compared with 12.5% during 2005.

Why? Lereah says the growing economy will boost the market, offsetting the negative impact of rising interest rates.

  • Why do you think prices will continue rising? The economy is growing and there are job gains, so consumers have the financial wherewithal to purchase homes.

  • Are you worried about the drop in non-owner-occupied real estate values in certain cities, such as San Diego? That’s not going to spread. The health of a local economy tells us whether a real estate market is in good shape or bad shape, and most of those are very healthy.

  • Do you think banks have been lending too aggressively? The last two years of the boom were exaggerated because of lending.

  • Why do you think mortgage rates will go to 7%? I don’t see the Fed taking rates up higher.

  • Do you think the housing market could ever crash? I’m getting tired of all these doomsayers. We live in houses, and our houses are not going to crash.

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[Getting Graphic] Further Evidence That Housing Has Shifted Gears

May 16, 2006 | 12:01 am | |

Getting Graphic is a semi-sort-of-irregular collection of our favorite BIG real estate-related chart(s).

Some Markets Start to Cool As Inventory Levels Rise; Low-Cost Cities See Uptick [WSJ]

Home prices were higher in many U.S. markets in the first quarter of 2006, but the pace of growth is cooling.

In its latest report of home prices in 149 metropolitan areas, the National Association of Realtors said the median price of a single-family home in the U.S. was $217,900 in the first quarter, up 10.3% when compared with the same quarter a year ago. That’s a smaller increase than in the fourth quarter, when the median price of a home was up about 13.6% year-over-year.

David Lereah, NAR’s chief economist, said in a statement that home prices are rising less rapidly because the inventory of homes available for sale is rising. “With the supply of homes picking up very nicely in many areas of the country, pressure is coming off of home prices.” Mr. Lereah also indicated that the trend is continuing into the current quarter, and that he expects price-appreciation will be “returning to normal rates of price growth in the single-digit range.”


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Personal Sleuthing For Housing Intangibles

May 15, 2006 | 12:01 am |

A hat tip to Socketsite for this one. June Fletcher’s Navigating the Web to Find Reliable Housing-Market Data [REJ] addresses the frustrations that buyers and sellers often feel when beginning the purchase/sale process.

_A question is posed to her:_

Why is it so hard to get good data on housing-market prices, especially in major metro areas like Washington, D.C.?

This is always the burning question. Realtors work with the data every day and more often than not, know the market better than you would after basic online research. Thats because brokers are on the front line, viewing properties for a living. However, they are in the business to sell and some are better at selling than research.

But things have changed over the past decade. Overwhelmingly, buyers and sellers do online research first and then contact a broker for the final process of narrowing down their research to make a decision. There are many intangibles that comprise the value of any given property.

The broker brings a certain tactile element to property research (granted, this assumes the broker is an expert).

Her column is very candid about the slant of information provided by various sources. that results in being very basic and sound advice to the reader.

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NAR v. Freakonomics Smackdown

May 9, 2006 | 12:02 am |

[Update: because of issues with our web host, all posts for May 9th were lost in addition to the backup! I have recreated it in rough fashion.]

Freakonomics has been taking on the National Association of Realtors (NAR) lately. I admire Freakonomics for their contrarian and smart views and their sense of shameless self-promotion. They were feuding with Malcom Gladwell of late. While I have certainly been on the NAR’s case lately for their public relations efforts to spin the real estate bubble talk and their use of misleading jargon, but this time I think Freakonomics has got it wrong.

Real Estate Businesses Are Not One-Time Transactions [NAR]

The research paper in this post [pdf] that is used as evidence that brokers are not professional is pretty tame because it uses the dreaded controlling for a wide range of housing characteristics catch-all phrase.

What these economists miss is the fact that one sale impacts future business immediately from neighborhors, other buyers and sellers in the same market. Words travels fast. To look at a real estate transaction as a once in a 7-10 year period is pretty thin reasoning. Have they ever been brokers for even a short period of time. The experience can be very eye-opening.

I know its fashionable to blame the real estate brokers for all the troubles in the real estate world, but researchers still need to be objective.

NAR wins the third round but there’s still a lot of time remaining.

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Late For The Party

April 27, 2006 | 7:20 am | |

James Hagerty in his article Housing Strength Shifts to New Markets [WSJ] notes:

As home sales cool on the East and West coasts, some cities that missed out on the real-estate boom are becoming the strongest markets.

Metropolitan areas whose housing markets look less healthy, at least in the short term, include Boston, Los Angeles, Miami, Minneapolis, New York, Philadelphia and San Francisco. All of them have growing inventories of homes and relatively weak job growth. As a result, houses that a year or two ago might have sold in hours now are languishing on the market for months, and some sellers are cutting prices.

Houston, Dallas and Atlanta appear to be postioned for future appreciation because of strong employment prospects and relatively tight inventory. These markets have been largely dormant while other metro areas are cooling, especially on the east and west coasts. New Jersey is expected to remain flat, per a NJ appraiser that I respect, but at the upper end, there is a 3-year supply.

The WSJ study says that Boston is among the worst right now. Another study I posted a few days ago indicated that Washington DC was also marginal because of the rampant speculation. On a trip to San Diego a few months ago, I was struck by how many condo sales offices there were downtown, yet their employment situation is strong which may mitigate some of the problems.

I thought it was especially interesting that a realtor in Miami indicated that the surge in inventory (up 236% over the past year) would be absorbed by population growth within 12-18 months. Thats gotta be something in the order of 10,000 to 15,000 condo sales sold over this period. I find that very hard to believe.

Actually, now that I think of it, this study seemed to single out a few cities as being promising, but most of the cities on the list seem to have problems and the premise of the story isn’t really proved.

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NAR Launches Blog: Covers Accuracy Of Accuracy Of PR

April 26, 2006 | 12:01 am |

The National Association of Realtors has gotten into the blog business with their launch of NAR in the News to look at how the news media covers NAR and our top issues.

News coverage shapes perceptions of people, organizations and entire industries. Yet few of us understand what goes into the making of a news story. “NAR in the News” will give its readers a peek behind the scenes into how journalists cover the nation’s largest trade association and the 1.2 million REALTORS® it represents.

For those who are excited about receiving unique insight from NAR, you may have to wait. The blog is being run by NAR’s Public Affairs Division (ie public relations) and appears to be largely an effort to stave off their recent weak public relations image. However, I am hopeful that more clarity and openess will result from this effort.

The blogosphere has created a number of public relations problems for NAR over the past year since the data and comments that are released, seemingly every day, are dissected and analyzed by hundreds of blogs (including Matrix). Up until the emergence of the blogosphere, NAR’s take on market conditions had usually been accepted at face value. However, their PR efforts during the change in the market over the past year has been largely a series of missteps, using strange market descriptors like housing expansion for the post-boom period to Balloons Not Bubbles! because they don’t pop, to their current favorite: high plateau.

Since the blog will be run by their PR group (where’s the cool name with the tell-tale trademark symbol the use after every instance of Realtor?).

I hope NAR does not squander this great opportunity to sell their expertise as real estate professionals. Perhaps they need a non-pr vehicle (blog) to do this.

How about “The Realtor”?

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Happiness At 5%, A Short Film The Realtor

April 7, 2006 | 9:19 am |

The short film The Realtor is something from a few years ago that I overlooked. It includes all the exagerated stereotypes about brokers that you have heard before so thats a bit tired but its worth a look. I am surprised they weren’t sued by NAR for using the trademarked name Realtor in the movie title. (Actually, this guy looks more like the stereotype for an appraiser).

From the press release

An Arizona produced short film has been accepted into the CU2 Video and Film Festival in New York City. The Realtor is an 8-minute dark comedy shot on digital video. It portrays a world filled with cutthroat tactics where a particular real estate agent is willing to do just about anything to close the sale. Running and hiding simply won’t do, as nothing will prepare you for The Realtor.

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From The Garden State: The February 2006 Otteau Report

April 4, 2006 | 12:02 am |

[This monthly market report is provided by Jeffrey Otteau of the Otteau Appraisal Group who also authors a series of widely followed market reports on the New Jersey real estate market. This information is collected from various sources including Boards of Realtors and Multiple Listing Systems in New Jersey.] I have known Jeff for many years and consider him one of the leaders of the real estate appraisal profession. He has taught me a lot about quantitative real estate market analysis over the years. -Jonathan Miller

STILL! Waiting for the Spring Market

Although buying activity in February registered a 15% increase over January’s level, it is currently running well behind last years pace confirming the slowdown in the residential market is continuing into 2006. Year-to-date buying activity is currently running 14% less than last year’s pace while the inventory of unsold homes on the market is 61% higher than a year ago. By combining these indicators the resulting Market Swing of -75% indicates that the 2006 market has lost 75% of its strength as compared to last year at this time. While considerable demand still exists from the buying side of the housing equation, declining housing affordability will continue to dictate the “mood of the market”. From the seller’s perspective, more aggressive marketing and pricing strategies will be essential to restore the buyer’s ‘sense of urgency’ that was prevalent in 2005.

Here are the 2005 annual stats as well.

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Broker-Bashing For The Sake Of Broker-Bashing®

March 29, 2006 | 12:01 am | |

I had heard about the ABC spot through the rumor mill and then Curbed laid it out for me in its full glory: Corcoran Gets Real, Offends REALTOR®

What Your Broker Won’t Tell You [ABC News] is more of a promo for her series on Good Morning America [] but I think that the message in the piece is just plain wrong. Who does it help? The consumer? Thats really not fair for BC to frame the piece this way, even to the cynical and it only appeals to the lowest common denominator. But then again, its the sensational stuff that draws viewer eyeballs. -sigh.

Barbara Corcoran’s segment on Good Morning America piece essentially stereotypes ALL real estate brokers as liars.

In fact, the comments in the Curbed post were mainly pile-ons and broker-bashing. Granted, brokers can be an easy target because of their visibility, marketing intensity, the dollars involved and the emotional aspects of real estate. Admittedly, I get annoyed when I see the Code of Ethics shoved in my face in the NAR’s recent advertising campaign, but its all about the people and most brokers I have met are nice and decent people.

Barbara Corcoran came to the New York real estate market, she innovated the real estate brokerage profession, conquered it, was well compensated and moved on. She is effectively out of the business but continues to try to stay relevant by “stirring it up” as she was known to do throughout her career.

I have been critical of the NAR of late, especially in the way their public relations machine handled the phraseology associated with the cooling housing market. For example: Housing Expansion, but in this case, I find myself agreeing with the NAR (kind of). Here is the NAR take on this matter.

Although you have to admit, Curbed’s curiousity about whether NAR President Thomas M. Stevens would actually would say: ‘”registered trademark!” after every time he utters the word “realtor?” Because that would be pretty damn weird.’

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Recession Scenarios And Other Observations To Bank On From FDIC

March 27, 2006 | 12:02 am |

To their credit, the FDIC writes in a good summary on the economy and some possible concerns for a recession in FYI: An Update on Emerging Issues in Banking: Scenarios for the Next U.S. Recession [FDIC]

Its a surprisingly good narrative on banking as it relates to housing as these industries go hand-in-hand in estimating when we may see the next recession.


The risk of a housing slowdown is another area of concern going forward. The recent housing boom has been unprecedented in modern U.S. history.2 It has been suggested by many analysts that the housing boom has been a significant contributor to gains in consumer spending in recent years. Indeed, a number of the FDIC roundtable panelists pointed to the apparent connection between rising real estate wealth during the past four years and the sustained strength in consumer spending during that period. Because consumer spending accounts for over two-thirds of U.S. economic activity, any shock to consumer spending, such as that which might be caused by a housing slowdown, is a concern to overall economic growth.

Housing analysts are in disagreement as to whether or not recent signs point to a moderation in housing activity or the beginning of a more significant correction. Currently, inventories of unsold homes and sales volumes are among the indicators pointing to a housing slowdown. Inventories of unsold existing homes rose from under four months of supply at current sales volume in early 2005 to 5.3 months of supply as of January 2006. Meanwhile, the pace of existing home sales has been trending lower since last summer. A clear trend in the direction of home sales and prices may not be evident until the completion of the peak spring and summer selling season later this year.

Many analysts argue that home prices in the hottest coastal markets, especially in the Northeast and California, could be poised to decline in the near future. For example, PMI Mortgage Insurance Company analysts place essentially even odds that home prices will decline during the next two years in a dozen cities in California and the Northeast.4 Should home prices either stop rising or begin to fall in these areas, local banks and thrifts would need to look to non-residential loans to support revenue growth.


There are concerns, however, that changes in the structure of mortgage lending could pose new risks to housing. These changes are most evident in the rising popularity of interest-only and payment-option mortgages, which allow borrowers to afford more expensive homes relative to their income, but which also increase variability in borrower payments and loan balances.


10 percent of U.S. households may be at heightened risk of credit problems in the current environment. This group mainly includes households that gained access to mortgage credit for the first time during the recent expansion of subprime and innovative mortgage loan programs.

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