Saturday, November 05, 2005

NAR Chief Economist Now Admits to the Possibility of a "Pop"

Now David Lereah, chief economist with the National Association of Realtors, is using the word "pop" to describe what will likely happen to some of the nation's real estate bubble markets:
""It's the peak of the boom," David Lereah said at the Chicago-based trade group's annual meeting this week. "But we're looking at a soft landing next year. I can't guarantee that there won't be some hard landings in some markets, where prices will actually decline. In fact, there will probably be two or three over the next two years that do pop.""

1 Comments:

Blogger Marinite said...

Pardon my rant:

It's quite amazing to me how David Lereah more and more frequently changes his tune from 'real estate always goes up', to 'real estate might be cooling off', to 'the market is becoming more healthy', to 'there will be a soft landing', to now 'there might be hard landings or even a "pop" in some markets'.

And then there is the real estate industry using scare tactics (http://tinyurl.com/df3bv) to desperately discourage the proposed mortgage interest deduction reform (http://tinyurl.com/9n342) debate. "Doom and gloom" was one of the ways Lereah discounted us "bubbleheads" but it seems to be acceptable for them:

"The National Association of Realtors estimated that housing prices could decline 15%..."

""You're going to be taking away from Middle America," said David Lereah, the association's chief economist. "Everyone, whether you use the mortgage interest deduction or not, the value goes down. You've just reduced the retirement nest egg for everyone.""

Where does the 15% figure come from and why is that such a disaster after the doublings and triplings of house prices in the last few short years? And with the rapid inflation in house prices, people can afford that price cut because they all have huge "equity cushions", right? That's what we've been asked to believe anyway. And what about how there is "a shortage of houses", "increased and ever increasing demand", "sound fundamentals", 'changes in demographics", "it's different this time", etc. that the real estate industry has been touting as justifying the inflation in housing prices across much of the nation? Aren't these arguments still "valid"? And besides, the proposed tax reform would only significantly affect houses that are priced at about a million dollars or more which represents a tiny fraction of the national marketplace (although which represents most of Marin):

""Taxpayers who bought $1 million homes expecting a generous tax break could be in for a shock, said Michael Fratanponi, at the Mortgage Bankers Association. 'That's going to really bite,' he said.""

If there is no RE bubble, if houses in places like Marin are truly worth the prices they are commanding, then what's the problem?

Nov 5, 2005, 12:02:00 PM  

Post a Comment

Links to this post:

Create a Link

<< Home

Terms of Use: The purpose of the Marin Real Estate Bubble weblog (located at URL http://marinrealestatebubble.blogspot.com/ and henceforth referred to as “MREB” or “this site”) is to present and discuss information relating to real estate and the real estate industry in general (locally, state-wide, nationally, and internationally) as it pertains to the thesis that recent real estate related activity is properly characterized as a “speculative mania” or a “bubble”. MREB is a non-profit, community site that depends on community participation and feedback. While MREB administrators do strive to confirm all information presented here and qualify all doubtful items, the information presented at MREB is neither definitive nor should it be construed as professional advice. All information published on MREB is provided “as is” without warranty of any kind and the administrators of this site shall not be liable for any direct or indirect damages arising out of use of this site. This site is moderated by MREB administrators and the MREB administrators reserve the right to edit, remove, or refuse postings that are off-topic, defamatory, libelous, offensive, or otherwise deemed inappropriate by MREB administrators. You should consult a finance professional before making any decisions based on information found on this site.

The contributors to this site may, from time to time, hold short (or long) positions in mentioned and related companies.