Posted by Jonathan J. Miller -Tuesday, May 23, 2006, 12:01 AM
In Housing Takes a Deep Breath [BW], Businessweek interviews David Lereah, the Chief Economist of the National Association of Realtors. He is one of the most polarizing figures in real estate today. Despite his title, he’s really an advocate for the Realtor trade group giant and he’s just doing his job, which is certainly fine. But lets recognize what the job actually is and not pretend it is something its not.
Whats grates on my patience is that his view points are out of step with what is really happening. I am not a gloom and doomist but it does the consumer a disservice to lay on so much spin.
The advent of the blog culture has called this practice into question. NAR has missed a tremendous opportunity to gain the public trust during this period of market change.
[tired cliches in bold. I wanted to take the opportunity to point them out only because there were so many in such a short interview -ed]
Now he says the housing market is just taking a breather. “We’re going to drop significantly, but it’s not a balloon bursting,” Lereah says. “This is a soft landing for the housing markets.” He expects total home sales to drop to 6.62 million in 2006, from 7.07 million in 2005. Meanwhile, he thinks prices will continue appreciating this year, but only by around 5%, compared with 12.5% during 2005.
Why? Lereah says the growing economy will boost the market, offsetting the negative impact of rising interest rates.
Why do you think prices will continue rising? The economy is growing and there are job gains, so consumers have the financial wherewithal to purchase homes.
Are you worried about the drop in non-owner-occupied real estate values in certain cities, such as San Diego? That’s not going to spread. The health of a local economy tells us whether a real estate market is in good shape or bad shape, and most of those are very healthy.
Do you think banks have been lending too aggressively? The last two years of the boom were exaggerated because of lending.
Why do you think mortgage rates will go to 7%? I don’t see the Fed taking rates up higher.
Do you think the housing market could ever crash? I’m getting tired of all these doomsayers. We live in houses, and our houses are not going to crash.