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Posts Tagged ‘NAR’

Depending How You Spin It, Good Housing Results Could Be Bad

November 15, 2005 | 10:59 pm |
Source: CNN/Money

[The NAR released their 3rd quarter report this week showing continued strength in the housing market [CNN].]( The CNN article is focused on an anticipated slowdown.

The clues the author presents are:

  • Builder pessimism
  • New-home sales declining
  • Developers have to drop prices to move inventory.
  • Inventories rising
  • Sell times are up

The takeaway with this article is basically that without double digit, skyrocketing appreciation, the “party is over.” However, in the same breath, the article concludes that we will see flat to 5% annual gains through 2007. The URL to the article is “prices going south.” That seems to infer falling prices doesn’t it?

“Regionally, the South recorded the slimmest gain, at 7.7 percent, while the West had the highest – 18.8 percent. The Midwest (13.1 percent) trailed the Northeast (13.2 percent) slightly for second place”

[Chart of 147 markets [CNN/Money].](

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Ain’t It Cooling?: The Number Of Sales Eases From Historic Highs

November 15, 2005 | 10:26 am | |

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].]( 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.

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Rinse Lather Repeat: Filtering Out Dirty Data In A Changing Market

November 13, 2005 | 1:25 pm | |

I recently added [a “faux chart” to my weekly post [Curbed].]( The numbers were perfectly aligned to illustrate a point that I wished to make. I had about 20 people comment on the post, and one of the anonymous responses (see below) got me thinking about the quality of data that is presented to the public.

Anonymous: “It is always amusing when some Wall Streeter treats real estate like stocks or bonds. Real estate is different from stocks and bonds. Prices aren’t transparent, “friction costs” (eg. brokerage, closing costs, etc.) are very high, and product isn’t easily compared. And you need a place to live. Does anyone actually know a person who sold their house/apartment in anticipation of the market falling, rented a place (or lived in the street), and subsequently bought the equivalent place for less money. I know several who messed that one up pretty badly (mostly Wall Street traders who confused their personal life with their professional life). Yes, real estate is cyclical, but it had maintained a pattern known as “higher highs / higher lows”. In other words it trends higher, although not necessarily in a straight line. Maybe you catch a dip if you are really really smart. But mostly you buy when you have to and sell when you have to. Real estate downturns are driven less by interest rates and more by job conditions in specific markets. Look at Denver after the telecommunications mergers, Houston after Enron, San Francisco after the tech bubble, and New York after the each Wall Street implosion. So much of the price data that the media latches onto is suspect. Small samples that are statistical garbage. Remember the old saying “lies, damn lies, and statistics”. If you can afford to buy, and find what you like, then buy. If not, rent or find another city. But get a life.”

If you think about it, with few exceptions, so much of the source data used by the media and consumer from the real estate market is from compromised resources within the real estate community. Then that news becomes a resource, and its a viscious (a bit melodramatic) cycle.

In other words, the stats are coming from people whose livlihood is dependent on how well the market does. I’m not suggesting that all stats are misleading. Some of the info is great, some is spun and some is presented naively. I am not sure how the consumer can tell the difference.

Its important that readers understand the source of the information they are relying on and take that with a grain of salt. I guess the moral of the story is “don’t believe everything you read.”

Here are some seemingly random thoughts:

  • The National Association of Realtors (NAR) is a powerful trade group who mission is to promote the real estate brokerage profession. They are the primary source of key housing stats like existing home sales and pending home sales indexes. They produce some interesting stuff we all rely on, but by definition, its spin.

  • Local MLS and real estate brokers are spokesman for the market: Same as NAR but on a local level. In a changing market, [they tend to go on the offensive and use historical trends [Matrix]]( as support for the argument that the market is currently “strong.”

  • The use of [“Chief Economists” [Matrix]]( for these trade groups and companies who are there only to “spin”, under the guise that their position is prestigious, above the fray, and are providing a neutral opinion.

  • The production of market reports whose stats are “cherry-picked” to show the most extreme results.

  • Market reports updated in small timelines, like monthly, using a small data set. They bombard the consumer with results of diluted reliability. For example, when a specific market area, like a neighborhood is based on a few dozen sales and compared to a prior month, how can that be useful?

  • The misuse of statistics to grab a headline. During the rising market, we saw crazy growth numbers without drilling down to see what it was all about. The same is happening in a less-frenzied market, were the stats are being exagerated to show a sharp downturn.

  • Press releases of studies done by a biased party to show how a weak aspect of the market is not really all that bad.

I guess you could say that I am currently in a “glass is half empty” mode.

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Week-ending Stats Fest Linkage

November 12, 2005 | 11:26 am |

  • [Weekly Mortgage Rate Trend Index (50/50 expectation for rising rates) []](

  • [30-Year Mortgage Rate Trend (Rates seemed to crest this week) []](

  • [Weekly Mortgage Applications Survey (Apps increase 2.3%) [MBA]](

  • [Key Economic Indicators (a whole bunch of them) [EconEdLink]](

  • [Charting Common National Data Series (Serious charting) [Economagic]](

  • [Pending Home Sales Index (pdf) [NAR]]($FILE/PHSI.pdf)

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Condo Prices Rose, Demographically Speaking

November 8, 2005 | 11:23 pm | |

[The National Association of Realtors tracked the national median sales price of a condo at $223,500 [REJ]]( From 2001 to 2004, condos appreciated 57% while single family houses appreciated 25%.


  • A demographic shift in the middle class with “single professionals, divorcees, active retirees and single parents” driving the market.
  • Speculation by investors
  • Developers have realized that land values can be maximzed by building condos on them instead of commerical properties.
  • Rising interest in downtown living.
Source: WSJ

[The Wall Street Journal did an analysis of 5 strong and 4 weak condo housing markets.](

“The median price for a condominium surpassed that of a single-family home for the first time last year. And it appears that this year will be the 10th consecutive record-making year in terms of rising U.S. condo prices and the number of condo sales, with median condo price tags still above those for single-family homes, says Walter Molony, spokesman for the National Association of Realtors. In September, the U.S. median condo price of $213,600 was up 9% from September 2004.”

[Home, Sweet, Condo? [Matrix]](

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Its Real Estate Groundhog Day And NAR Did Not See Its Shadow

November 7, 2005 | 8:37 am |

The National Association of Realtors did not see its shadow and believes [spring will come early this year. []](

There has been a tremdous amount coverage on the shift in gears of the real estate economy of late and I have read more articles on the housing market than I care to admit. Besides the Census Bureau, the NAR has been one of the primary sources of statistic and interpretation to the public on this market transition. While I can’t verify the stats they use, their description of the market has been generally accurate and largely absent of the grossly exagerated spin we would expect from a trade group with a built in bias. Of course there is plenty of spin, but hey, they are a trade group.

Here’s a typical article written from a NAR press release.

[NAR Sees Soft Landing as Housing Bubble Transitions To Expansion [Mortgage News Daily]](

However, on a local level, I find that the word is often not getting to the brokers on the front line. Realtors are under no obligation to predict the market. They are only obligated to present as much accurate information as they can for their clients so the client can make the decision that is right for them. Quite often, the arguments for a “strong” market is based on the fact that the prior period saw record prices. First of all, that would mean that the market, by definition, would never fall. And by the way, what does “strong” mean? A lot of sales? Rising prices? Not as sharp of a price drop as was expected?

Here’s a few articles that are based on good old-fashioned hard selling:

*[Realtors: No sign of price bubble here [Orlando Sentinel]](,0,7188322.story?coll=orl-business-headlines)
*[Bubble talk overblown, according to top Realtor [Contra Costa Times]](
*[Home prices — and competition — strong [Seattle PI]](

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NAR Pending Home Sale Index Weakens, But Still Nearly At Record Levels

November 6, 2005 | 9:28 pm |

Since we are in a changing market, it is also important to look at price indicators that are closer to the point where the “meeting of the minds” occurs between buyers and sellers. As I indicated in a [prior post on Matrix](, the national housing stats for existing home sales (NAR) are based on closed sales and new home sales (Census) are based on contracts. The NAR also has an indicator based on contracts called the [Pending Home Sales Index or PHSI [PDF]]($FILE/PHS0509.pdf/)


Source: NAR

Pending sales eased from last month but was at its [second highest mark on record [RISMedia]](

Whats really interesting about the stats is the difference between seasonally adjusted stats and the stats that were not seasonally adjusted. For example, the seasonally adjusted national numbers showed a 0.3% drop in contract prices while the unadjusted numbers showed a 12.7% drop. Quite a difference betweent the results. Annual changes were up 3.3% seasonally adjusted and up 2.7% unadjusted.

At the end of the day, these numbers tell us that contract prices, as a leading indicator, were slightly weaker nationwide compared to the prior month.

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Thursday’s Matrix Links

November 2, 2005 | 11:46 pm | |

  • [Weekly Mortgage Rate Trend Index (Rates may fall) []](

  • [30-Year Mortgage Rate Trend (Rates are rising) []](

  • [Weekly Mortgage Applications Survey (Apps are down) [MBA]](

  • [The National Debt To The Penny (Its rising) [Bureau of Public Debt]](

  • [Ernst & Young Housing Authority (Normal cyclical slowdown) [Marketwatch]](

  • [Realtors® Raise Alarms Over Real Estate Tax Proposal [NAR]](

  • [Key Economic Indicators (a whole bunch of them) [EconEdLink]](

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A Record 59% Of Consumers Think Realtors Do A Good Job: Is This A Lot?

October 31, 2005 | 10:09 pm |

The National Association of Realtors released a survey that said that [public opinion about Realtors set a record high for the third year in a row [RISMedia].](

Those surveyed were asked about the effectiveness of their Realtors and 59% found them to be effective. The NAR has been touting this as part of their 8 year public awareness campaign.

Being a Realtor can be a tough job. Is it just me or is 59% on the low side? I am not clear why this figure is being touted so much.

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New Home Sales and Existing Home Sales Are Way (30 to 60 Days) Apart

October 30, 2005 | 9:00 pm |

The [US Census Bureau]( clarifies the difference between new home sales and existing home sales. “New home sales and existing home sales are released each month at about the same time. Many comparisons are made between the two series, but before doing any comparisons, one must be aware of some definition differences that affect the timing of the statistics. “

New Home Sales
“The Census Bureau collects new home sales based upon the following definition: “A sale of the new house occurs with the signing of a sales contract or the acceptance of a deposit.” The house can be in any stage of construction: not yet started, under construction, or already completed. Typically about 25% of the houses are sold at the time of completion. The remaining 75% are evenly split between those not yet started and those under construction. “

Existing Home Sales
“Existing home sales data are provided by the National Association of Realtors®. According to them, “the majority of transactions are reported when the sales contract is closed.” Most transactions usually involve a mortgage which takes 30-60 days to close. Therefore an existing home sale (closing) most likely involves a sales contract that was signed a month or two prior. “

To Summarize
Given the difference, the indicated trends in New Home Sales would probably lead Existing Home Sales by 30 to 60 days, the length of time it takes for an existing home sale to close from point of contract.

However, New Home Sales are more volatile from the standpoint that it is a much smaller data set as they represent something like 10% the number of Existing Home Sales.

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The Conundrum: A riddle in a mystery in an enigma in a boom

October 13, 2005 | 11:17 am | |

[Greenspan’s conundrum has been the fact that [Financial Times]]( bond yields have remained low. We are expecting to see some upward movement as more inflationary data comes out over the next few months.

Two sides are presented as to why the bond market yields have remained low, which has extended the housing boom and has been counter to historical patterns:

Why is the bond market right? Investors are buying bond yields at low rates because they believe the economy will slip. A flat yield curve often pre-dates a recession. Also, the bond market is not concerned about growth right now, only inflation. With central banks keeping rates low as well as heated competition from Asia. Also, demographics may be keeping yields low. The 25-44 year old age group is shrinking so consumption growth should shrink as well keep rates low in the long term.

Why is the bond market wrong? A recession is not in the forecast and the equity (stock) markets are not worried about one. Also, there may be a global savings surplus – and we hear this a lot – there is so much capital out there, seeking out limited opportunities for investment. A potential revaluation in the Yuan, high US budget deficit and further inflationary economic data would cause yields to re-adjust to proper levels. There was an article today in the [Wall Street Journal that suggests that global inflation may return.](

The sharp rise in energy costs and economic damage caused by the 2 recent hurricanes has added to the pressure.

In other words, no one really knows what the long term outlook is for bond yields. Yet it is critical to the housing market since mortgage rates are usually tied to bond yields.

On the other hand, the [NAR’s Home Sales Forecast is rising [RisMedia]](

[[NAR’s 10-2005 US Economic Outlook] [PDF]]($FILE/currentforecast.pdf/)

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NAR: So What Else Is New? Existing Home Sales Prices And Volume Increase In August

September 26, 2005 | 11:50 am | |

ladders Approximately 85% all residential home sales are existing homes. The large sample size makes the monthly NAR report representative of the country’s housing market as a whole than then new home sale stats released by the US Commerce Department tomorrow. However, existing home sales are based on closings so it lags the current market while new home sales are measured at time of contract.

The housing market has been the main driver of the U.S. economy this decade, accounting for 50 percent of the overall growth and more than half of the private payroll jobs created since 2001, Merrill Lynch said in a report on Aug. 15.

[Today the NAR released their existing home sale statistics for August and the sesults were quite robust [Bloomberg].]( The number of sales for August increased 2% over the prior month and 7.8% over the prior year suggesting that the rate of existing home sales has increased this summer.

The median sales price of of a US existing home was $220,000, a record. It was up 15.8% from the prior year.

The NAR expects housing demand to continue to increase due to the Hurricane Katrina. The cleanup will provide a drag on the economy keeping mortgage rates low, the primary driver of the current high level of sales volume. Steady job creation, easy access to financing have kept demand high.

The results were somewhat of surprise given the traditionally slow summer months and the concerned positioning the Fed has taken on the housing market this summer. However, these statistics do not reflect the August market due to the delay between contract and closing date.

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