""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.""
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:
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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?
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