Analyzing why "It's a great time to buy or sell a home!"

Saturday, November 04, 2006 | 07:38 AM

Its_a_great_time_2 Yesterday, we discussed the $40M NAR ad campaign, "It's a great time to buy or sell a home!"

On the way home, I actually saw the full page ad in the Personal section of the WSJ; (Unfortunately for the NAR, the section's front page article was "The New Word in Home Sales: 'Canceled')

I read the ad as a typical consumer would . . .  then I reread the ad critically.

When I was finished, it occured to me that EVERY SINGLE STATEMENT IN THE AD IS MATERIALLY FALSE OR MISLEADING. The nicest thing I can say about any of the points is that they are incomplete.

To wit:

NAR Advertising Claim Reality
Interest Rates Near Record Lows
Today’s interest rates are comparable to 40-year lows, offering homebuyers a once-in-a-lifetime opportunity.
Interest Rates WERE at record lows in 2003 when the Fed Funds Rate was 1%; Since then, rates have climbed 425 basis points (4.25%); Mortgages were as lows as 5.125%; They recently were over 7%. 
Large Inventory Won’t Last
There are currently 3.75 million homes for sale. We have had a record inventory of homes on the market in recent months, offering consumers the greatest choice in decades.
Slowing Sales and Overbuilding are the reasons for the inventory buildup; Year-to-date sales are down 16.5%.

Economics 101 tells us that increased supply means decreased prices.

Large selection also means selling your current home has become more difficult; 
Prices Overall Have Stabilized
Contracts for home sales in August are up 4.3 percent1 and the outlook is for home prices to increase next year.
Home prices have experienced their first price drop in a decade;

As unit sales continue to slump, the  Median Price Keeps Falling;

This is no basis for assuming any price stabilization has occured.
Positive Outlook
Former Federal Reserve Chair Alan Greenspan recently said that housing prospects are looking up. “Most of the negatives in housing are probably behind us. The fourth quarter should be reasonably good,  certainly better than the third quarter.” According to industry estimates, 2006 will be the third-best year on record for home sales.
Is this the same former Fed Chief  Greenspan who advised getting variable APRs at the precise low in interest rates?

As to the "record sales," its more informative to look at the current trends, rather than the raw numbers (population growth will create meaningless "record numbers").
Real Estate is a Great Investment
Homeownership is a safe, secure way to build long-term wealth. The national median price of homes bought ten years ago has increased 88 percent. The number of US households is expected to increase 15 percent during the next decade, creating a continued high demand for housing.
Actually, it performs about half as well as stocks do over the long run.

Up 88% over the past 10 years is far above the historical norm -- mean reversion is very likely.   

(But you gotta live somewhere, right?)   
Don’t Delay
Now is a great time to buy or sell a home.
If you delay, you run the risk of paying less for a new home.

In all my experience trading, I cannot recall ever coming across any item that it was a great time to buy and sell something simulataneously.

Perhaps the NAR is a fully hedged Long/Short fund .  . .


Gee, no wonder so many real estate agents have a sketchy reputation; The bullshit is a professional hazard, from their Professional Association on down . . . 


The New Word in Home Sales: 'Canceled'
Buyers Back Out of Deals In Record Numbers; A $30,000 Deposit, Lost
WSJ, November 3, 2006; Page W1

Saturday, November 04, 2006 | 07:38 AM | Permalink | Comments (119) | TrackBack (1) add to | digg digg this! | technorati add to technorati | email email this post



TrackBack URL for this entry:

Listed below are links to weblogs that reference Analyzing why "It's a great time to buy or sell a home!":

» The NAR’s Tale from Daily Pundit
This analysis is good to keep in mind when next reading something put out by the National Association of Realtors. Quote-of-the-day:In all my experience trading, I cannot recall ever coming across any item that it was a great time... [Read More]

Tracked on Nov 5, 2006 7:05:06 PM


About a month ago I called a very smart, successful realtor to ask how the market was and whether prices were coming down. (I live in the northeast.)

Her Queen-of-Spin answer was wonderful. "Prices aren't coming down -- but it's a good time for buyers: they have many more houses to choose from."

I'll bet they do. And counting!

Posted by: ~ Nona | Nov 4, 2006 10:10:56 AM

The comments to this entry are closed.

Recent Posts

December 2008
Sun Mon Tue Wed Thu Fri Sat
  1 2 3 4 5 6
7 8 9 10 11 12 13
14 15 16 17 18 19 20
21 22 23 24 25 26 27
28 29 30 31      


Complete Archives List



Category Cloud

On the Nightstand

On the Nightstand

 Subscribe in a reader

Get The Big Picture!
Enter your email address:

Read our privacy policy

Essays & Effluvia

The Apprenticed Investor

Apprenticed Investor

About Me

About Me
email me

Favorite Posts

Tools and Feeds

AddThis Social Bookmark Button

Add to Google Reader or Homepage

Subscribe to The Big Picture

Powered by FeedBurner

Add to Technorati Favorites


My Wishlist

Worth Perusing

Worth Perusing

mp3s Spinning

MP3s Spinning

My Photo



Odds & Ends

Site by Moxie Design Studios™