NAR: Home Prices Seen Rising in '07
"After bottoming in the fourth quarter of 2006, existing-home sales are forecast to gradually rise through 2007 and into 2008, while new-home sales should turnaround by summer, according to the latest forecast by the National Association of Realtors."
-NAR Press release
That's the drug-addled ravings most recently unveiled by the tripheads at the National Association of Realtors. At a recent Rave, David Lereah was heard to say: "Dude, look at the trails -- and the colors! Awesome!" He then giggled and wandered off, muttering to himself about New Home cancellation rates.
The rest of the NAR release amounted to a thinly veiled cry for help, revealing deep problems with either alcohol abuse or dementia. In a related development, several NAR economists were treated for blunt head trauma, a medical condition which helps explain the rest of their recent public statements.
According to the NAR:
• Existing-home sales for 2006 are expected to come in at 6.50 million; Existing-home sales are forecast to total 6.42 million in 2007;
• Total housing starts for 2006 are likely to be 1.81 million units; Total starts for 2007 are forecast to be 1.51 million; This is a drop of16.6%, to the lowest level in a decade;
• Median existing-home price for all of 2006 is expected to rise 1.1% to $222,100; For 2007, NAR forecasts a gain of 1.5% to $225,300.
• Median new-home price rose only 0.3% to $241,600 in 2006; NAR projects it to grow 3.0% in 2007 to $248,900.
• Annual totals for existing-home sales will be fairly comparable between 2006 and 2007
Note that some people who were not in the throes of a hallucinatory experience disagreed with the NAR assessment: Mortgage Bankers Association chief economist Doug
Duncan said "some markets could see price declines of 10% to
20% this year, a shift from the last four to five years, when
there were almost no markets where prices were declining."
Further, the sober Mr. Duncan forecasts that "Home sales will decline 7% to 8% this year, with most
of the decline in the first half."
>
Sources:
Gradual Rise Projected for Home Sales
National Association of Realtors
Realtor.com, WASHINGTON, January 10, 2007
http://tinyurl.com/yeto3d
Home Prices Seen Rising in '07
CAMPION WALSH
WSJ, January 11, 2007; Page D2
http://online.wsj.com/article/SB116848119665773314.html
Thursday, January 11, 2007 | 06:26 AM | Permalink
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Comments
yes, this is satire . . .
Posted by: Barry Ritholtz | Jan 11, 2007 6:34:47 AM
Barry isn't is interesting how everything anyone has ever studied in the field of economic hypothesis must either happen in 2007 or 2008? "Dollar collapse" and "housing bottoms"...(and Yes the satire. lol.)
Posted by: My1ambition | Jan 11, 2007 6:52:53 AM
You're having too much fun, Barry!
Posted by: Ironman | Jan 11, 2007 8:21:32 AM
2008 - The Year of the Real Estate Perp Walk?
Posted by: Turbo | Jan 11, 2007 8:27:30 AM
"some markets could see price declines of 10% to 20% this year, a shift from the last four to five years, when there were almost no markets where prices were declining." Further, the sober Mr. Duncan forecasts that "Home sales will decline 7% to 8% this year, with most of the decline in the first half."
*YAWN* HEARD THE SAME THING THIS TIME LAST YEAR AND THE YEAR BEFORE. *SIGH*
Posted by: Larry Nusbaum | Jan 11, 2007 8:33:10 AM
Same dichotomy here in Vegas:
http://www.reviewjournal.com/lvrj_home/2007/Jan-10-Wed-2007/business/11812632.html
Posted by: Ken M. | Jan 11, 2007 8:36:46 AM
Um, but Larry, price declines of 7-8% DID happen in 2006...
Posted by: Mel | Jan 11, 2007 9:33:53 AM
If anything, those forecasts are very bearish. With CPI ex-shelter running at 3% a year over the last three years, a forecast for 0.5%-1.5% nominal price increases is a forecast for 1.5%-2.5% real price declines. That, I would posit, is a realistic assessment of one likely course of housing prices. There are a lot of things that keep prices from dropping in nominal terms, from the government subsidy to seller reluctance to leverage itself. You don't have to have Mr. Nusbaum's fetish for residential investment to believe that markets could continue to move up in nominal terms as they adjust.
Of course, another likely course are sales rate declines and actual nominal price drops. As I run the numbers it would take a further -15% drop in the sales rate for new homes to return to trend population growth, which imo is about where that rate should sit.
However, -10% seems like an outlying prediction for prices. Residential housing just doesn't like to drop much in nominal terms.
Posted by: wcw | Jan 11, 2007 9:42:54 AM
Yes, Mel, in Anderson, Indiana they did fall 6%. Good job.
Posted by: Larry Nusbaum | Jan 11, 2007 9:45:27 AM
Mel -- where, and more importantly, using what price series? Most of the "declines" have happened in median sales prices, which reflect not price drops but sales mix changes. That sales mix has moved is meaningful, but doesn't tell you anything about price declines. For that, use a repeat-sales index like the OFHEO's HPI. Click through, download the metro-area data, and check out how few showed a year-over-year price drop from 05Q3-06Q3. Even Detroit only drops a few percent.
Posted by: wcw | Jan 11, 2007 9:47:01 AM
wcw: good morning! nowhere did I write that I believe "that markets could continue to move up". But, I like the fetish thingy.
Posted by: Larry Nusbaum | Jan 11, 2007 9:50:51 AM
Larry - You seem to have been around a while, so I was wondering, has there ever been a period when you were NOT bullish on RE? Because looking back, I see some times when RE didn't do so well, and some of those times have some things in common with well, this time.
Posted by: John F | Jan 11, 2007 10:53:03 AM
The NAR bullish in 2007? I am utterly shocked and gasping for air. Come on, when have they not been bullish? The L.A. Times published an article this Sunday in their Real Estate section discussing that we have reached the “bottom” of the housing correction.
Are you kidding me? What correction? The pent up inventory and pseudo demand was a last push by easy money lending and credit so abundant that Visa and Mastercard look like amateur hour at the Laugh Factory.
And Larry in regards to Phoenix, we’ve already pushed up to 50,000 in a matter of one week. Think inventory is going to go down especially with all the housing projects coming online this year?
Posted by: Dr. Housing Bubble | Jan 11, 2007 11:26:01 AM
John: I have not been "bullish" on housing since mid-2005. I remain bullish in commercial, especially in office condos and neighborhood strip centers.
I don't buy the doom & gloom reports for two reasons: They have been wrong for 5 years running and because it is not hard to make money in housing even when national trends and national numbers are down. Can't say the same thing about the stock market.
1991-1994 was a rough period for housing and a great time to buy.
Also, I have no idea why the David Lereah obsession is so strong. I have never met a single person (human being) who makes buy/sell decisions on houses or on condos based on what he writes in a report or says at a conference. I am sure that people don't know who he is. That's very different how investors use Wall St research to make investment decisions.
Posted by: Larry Nusbaum | Jan 11, 2007 11:28:07 AM
"The NAR bullish in 2007? I am utterly shocked and gasping for air. Come on, when have they not been bullish?"
Dr.: So what? Who cares if the NAR is bullish? Means absolutely zip.
Posted by: Larry Nusbaum | Jan 11, 2007 11:31:26 AM
Um, Larry, where we are here in NY? Prices in the Holy Land, also known as Westchester County, land to bankers, bankers and more bankers - down over 9%.
Posted by: Mel | Jan 11, 2007 12:25:31 PM
Annual Percent Change in OFHEO MSA House Price Indexes through 2006 Q3
Year Qtr New York-White Plains-Wayne, NY-NJ (MSAD
2006 1q +16.6 %
2006 2q +12.44 %
2006 3q +9.43 %
Posted by: Larry Nusbaum | Jan 11, 2007 12:41:01 PM
C'mon, fetishist, report the data in the normal way. OFHEO HPI for New York-White Plains-Wayne, NY-NJ looks like:
2005Q3 250.33
2006Q1 268.89 7.4%
2006Q2 271.98 1.1%
2006Q3 273.93 0.7%
I swear, it's like herding cats getting people not to fudge the numbers.
Posted by: wcw | Jan 11, 2007 12:57:31 PM
Here's an interesting article about what's REALLY happpening in the real estate market, should anyone care after going through the rhetoric:
http://www.inman.com/inmannews.aspx?ID=61159
(it'll be open until midnight; locked after that)
Posted by: Sherman McCoy | Jan 11, 2007 1:04:15 PM
Sorry, was talking monthly medians...and the drops overall are worse than 9%. But ok, I will believe Larry from now on - all is well and perfect!
http://www.nysar.com/pdfs/monthmedian.pdf
Posted by: Mel | Jan 11, 2007 1:11:47 PM
Mel: don't believe anything. It's not important. We don't invest in medians or averages. Find a good deal and buy it. But, don't look to hold short-term. No one can make money in houses by watching the median price yoy in Ohio (or anywhere else). It's not like buying a good company in the wrong sector at the wrong time.
Besides, commercial real estate continues to boom.
Posted by: Larry Nusbaum | Jan 11, 2007 1:51:50 PM
"Many of the bigger price decreases in the area were due to unrealistic pricing in the first place, she said -- like homes with comparable sales at $775,000 priced at $950,000."
And, a drop back down in pricing to it's comp does not mean prices are dropping for these $775,000 houses.
Thanks for the link Sherman.
Posted by: Larry Nusbaum | Jan 11, 2007 2:04:29 PM
Larry, interesting, so if it was predicted that increasing the air in a balloon would eventually pop it, you'd look at the engorged, expanding balloon and say "well, they've been wrong about it popping in the past so now it's less likely to pop." Interesting.
Posted by: KirkH | Jan 11, 2007 2:56:51 PM
I agree with the problem with the median, but the OFHEO measure, in addition to lagging tremendously, does not account for incentives or improvments and it only tracks homes with conforming loans. And if anything, the median is overstating prices, not understating, because people are generally getting more bang for the buck.
As of right now San Diego is generally down to mid-2004 price levels. This is a decline of probably 8-10% off the peak in late 05. This is clear from looking on an individual basis at current asking prices (for homes that haven't even been sold yet) vs. prior sales for those homes.
Deny it if you like -- doesn't matter to me.
Posted by: dn | Jan 11, 2007 3:17:18 PM
"I have not been "bullish" on housing since mid-2005.... 1991-1994 was a rough period for housing and a great time to buy."
I have not been bullish for a little longer than you. I finally decided to sell/rent last spring (bought in 98, Bay area housing market). There are a lot of reasons, but basically, I just don't see another 180% increase coming over the next 8 years. Sometimes it is just about price.
Posted by: John F. | Jan 11, 2007 3:38:40 PM
