NAR meets housing reality

In the face of overwhelming evidence of a housing market meltdown, the NAR is slowly recognising the extent of the disaster. Today, it published their latest market assessment, and further reduced their 2007 housing price forecast. The group now believe that house prices will fall by about 1.4 percent this year.

The NAR also reduced their sales forecast, suggesting that existing home sales will reach just 6.11 million this year. That is a lot of lost 6 percent commissions. Furthermore, the group now believes that housing starts in 2008 will fall to their lowest level since 1998.

Although the NAR have woken up to the the fact that 2007 will be a bleak year for realtors, denial again sets in when it considers 2008. The group believe that existing home sales will increase, and prices will recover slightly. Yeah right, 2008 will be prime time for ARM resets. The year will be marked by an avalanche of defaults and foreclosures, which will provide the ideal background for an market recovery.

A pattern is now emerging. From here on out, the NAR will produce their monthly forecast, with each press release more pessimistic than the one issued before. It will be a case of hope fighting it out with reality. Of course, reality always wins.

Lereah finally goes.....

The story of David Lereah, the NAR's former chief economist, reflects the highs and lows of the US housing bubble. Back in 2004, he was the chief cheerleader for the NAR, talking up housing, and promising everyone the future of eternal price appreciation. His books were bestsellers and as a speaker he was in constant demand.

Like house prices, his economic forecasting gradually departed from fundamentals. However, house prices were the first to begin a correction. As a bubble began to burst, Lereah's forecasts became increasingly absurd. He called the bottom no fewer than four times. As each month produced more and more depressing data on the housing market, his optimism was irrepressible. Each NAR press release protested that the current slowdown was only temporary and that things will improve shortly. However, his credibility began to diminish and this reflected upon his employer, who weren't prepared to look foolish for his sake.

It looks like David Lereah blamed the housing crash on the weather just once too often. The NAR leadership realised that he had to go. While the precise details of his departure are a matter speculation, it is not hard to imagine a gentle conversation where David is asked politely to leave in a media friendly manner.

In some respects, Lereah's departure marks an unprecedented degree of public accountability. In the past, Lereah could safely make his absurd comments without any fear of losing his job. Today however we have the housing bubble bloggers, who unlike the mainstream media, are prepared to question self-interested commentary from pressure groups like the NAR. Lereah and the NAR were held to account for what they said, and where they were found wanting, the bloggers demanded the truth. Ultimately, the bloggers made Lereah a liability for the NAR that his why Lereah was pushed out.

In this regard, three bloggers deserve particular mention; housing panic, the bubblemeter and David Lereah watch. Today is a victory for them and the truth.