Wednesday, January 25, 2006

NAR Predictions Worthless

From the NY Times Walk-thru blog:

How Good are the Realtors’ Predictions?

Hats off to writer Damon Darlin for taking the time to compile the NAR estimates released over the past few years. Here is some of the article:

What actually happened in 2002: There were a total of 5.6 million existing-home sales in 2002, up 5 percent from the previous record of 5.3 million in 2001.

NAR was off by 6.4 percent.

What actually happened in 2003: There were a total of 6.1 million existing-home sales in 2003, up 9.6 percent from the previous record of 5.6 million in 2002.

NAR was off by 14.2 percent.

What actually happened in 2004: Existing single-family home sales surged in 2004, well above the previous record set in 2003, according to the National Association of Realtors. There were a total of 6.7 million existing-home sales in 2004, up 9.4 percent from 2003. This is the fourth consecutive annual record.

NAR was off by 14 percent.

What actually happened in 2005: There were 7.1 million existing-home sales in all of 2005, up 4.2 percent from 2004.

NAR was off by 9.6 percent, and guessed the direction wrong.

So what have we learned?

Caveat Emptor!
Grim

29 Comments:

Anonymous Anonymous said...

So what have we learned?

Caveat Emptor!
Grim

Ooo Ooo I can answer that one! It seems to me that NAR can't do basic math???? LOL

1/25/2006 02:51:00 PM  
Blogger chaoticchild said...

I think we can all agree that NAR is full of shxx.

But these estimates are meant to be best educated guesses. They aren't meant to be fortune telling. I don't have problem with the data. I have problem with NAR interpreting these estimates.

1/25/2006 03:45:00 PM  
Blogger grim said...

Mortgage rates ticked up slightly this week..

Weekly Home Mortgage Rates

And if anyone was watching the bond market today, looks like the 10Y yield is going to make another attempt at breaking through the 4.5 barrier.. Perhaps it will stay there this time..

grim

1/25/2006 03:55:00 PM  
Anonymous Anonymous said...

Lereah is the Irving Fisher (Yale professor 1929 - Stocks at a permanent plateau Weeks before thwe crash) of today.

This guy should be held accountable for his reckless deceptive statements.

1/25/2006 04:07:00 PM  
Blogger grim said...

"Home sales are coming down from the mountain peak, but they will level-out at a high plateau -- a plateau that is higher than previous peaks in the housing cycle. This transition to a more normal and balanced market is a good thing." - David Lereah, January 2006

"Stock prices have reached what looks like a permanently high plateau. I do not feel there will be soon if ever a 50 or 60 point break from present levels, such as (bears) have predicted. I expect to see the stock market a good deal higher within a few months."
- Irving Fisher, October 1929

1/25/2006 04:26:00 PM  
Anonymous Anonymous said...

This goes both ways. A lot people predicted that the housing market would fall in 2003, 2004, and 2005 and they were wrong.

My point is that all predicitions should be taken with a grain of salt - even those on this board.

1/25/2006 05:25:00 PM  
Blogger grim said...

Then the NAR should peddle their predictions as exactly that, predictions, and not gospel.

Unfortunately, the NAR and Lereah are not economists doing any sort of forecasting, they are cheerleaders whose economics are entirely indistinguishable from marketing.

The NAR and Lereah are the mouthpiece of the entire U.S. Real Estate industry. As such, their forecasts carry much more weight than any other. Thus they have a responsibility to provide fair, reasonable, and accurate information. Over the past few years this has certainly not been the case. Unfortunately, it's only when the party started coming to an end that they started practicing restraint in their announcements and forecasts.

The issue wasn't that their track record was abysmal, it was that they pushed their forecasts on the American public as absolute truths, when they were obviously not.

The NAR and Lereah will have lost the trust of many when this exercise is over.

Caveat Emptor,
grim

1/25/2006 05:53:00 PM  
Blogger RentinginNJ said...

The level of home sales activity is now at a sustainable level, and is likely to pick up a bit in the months ahead. Overall fundamentals remain solid, driven by population and employment growth as well as favorable affordability conditions in most of the country, so we expect the housing market to remain historically high but lower than last year’s record.”
- David Lereah, NAR’s chief economist,

“I see nothing in the present situation that is either menacing or warrants pessimism... I have every confidence that there will be a revival of activity in the spring, and that during this coming year the country will make steady progress."
- Andrew W. Mellon, U.S. Secretary of the Treasury December 31, 1929

1/25/2006 05:58:00 PM  
Anonymous Soterios said...

The reason why it doesn't go both ways is this...

Sure people have been saying the housing market is in a bubble for a while, but if you believe that the market is not acting rationally it is basically impossible to predict when the downturn will occur, since the very nature of the markets irrationality makes it impossible to predict.

People were also predicting that the stock market was in a bubble in 1995, the fact that it didn't pop until 2000 just meant the market (or at least a portion of it, tech sector) was essentially acting irrationally for all those years

1/25/2006 09:23:00 PM  
Blogger chicagofinance said...

anecdotal evidence of irrationality

from a Hoboken website:

"We have reserved a lower level unit next on the south side (facing the train). We are psyched about the space (1400 sq feet) but concered about the noise. Toll Brothers says that the glass they are putting in the windows on this side of the building will be a special sound proofing laminate. I am concerned about the noise, as we have a baby on the way. Anyone with experience on living right next to a train???

1/25/2006 09:28:00 PM  
Blogger grim said...

Trust for the NAR and NAR Member organizations keeps disappearing.

How about this one?

Mass. Association of Realtors December Report

"The more moderate sales pace reflects softening buyer demand due to higher mortgage rates and a weak job market, as well as increased inventory levels, which have led to a more balanced market in which buyers don’t feel the same sense of urgency to make a quick offer as they did when supply levels were tighter. False assertions of a price bubble in the local market also have prompted some buyers to delay their home buying decisions"

The MAR are blaming regional declines on "false assertions of a price bubble".

How, exactly, can you trust an organization like this?

Well, wy should you, you all know what the NAR missionand vision is, right?

NAR's Mission and Vision

Mission
The core purpose of the NATIONAL ASSOCIATION OF REALTORS® is to help its members become more profitable and successful.

Vision
The NATIONAL ASSOCIATION OF REALTORS® strives to be the collective force influencing and shaping the real estate industry.

You'll notice there is nothing about helping consumers, only it's members.

Suddenly all their media statements make perfect sense..

Caveat Emptor,
Grim

1/25/2006 10:49:00 PM  
Anonymous Anonymous said...

Greedy realtors a very unethical group. when the time comes to buy and a realtor makes some outlandish questionable remark i'll ask them to email it or put it in writing.

1/26/2006 08:26:00 AM  
Blogger Richie said...

Soundproofing from a train?

Sorry, you'd have to have REALLY thick glass to soundproof that noise. Not to mention that if the trains that go buy cause any vibrations, there's nothing you can do against that, unless ofcourse they are putting the building on shock absorbers.

Soundproofing one side of the building won't keep out the noise coming from the other sides as well.

1/26/2006 09:09:00 AM  
Blogger grim said...

10Y yield punched through 4.5 this morning.

1/26/2006 10:19:00 AM  
Anonymous Anonymous said...

Being next to light rail is not a big issue. If its the big Hoboken stockyard, or the big NJ Transit rail lines, it is definitely an issue.

On the other hand, if the apartment is high enough up, or its one of the lower traffic lines, it may not be that much of an issue.

1/26/2006 10:24:00 AM  
Anonymous Anonymous said...

Actually, I take that back, they said they had a lower level unit. If its one of the busy lines, well -- good luck.

1/26/2006 10:26:00 AM  
Blogger RentinginNJ said...

10Y yield punched through 4.5 this morning.

A report came out today showing stonger than expected orders for durable goods, raising the possibility of increased inflationary pressure. This should keep the Fed pushing up rates a few more times

1/26/2006 10:53:00 AM  
Blogger grim said...

Don't forget about Initial Claims coming in under estimates..

Pushing past 4.53%..

grim

1/26/2006 11:49:00 AM  
Blogger NJGal said...

If the guy from Hoboken was talking about the new 700 Grove by Toll Brothers, which I think he is, then it's definitely next to NJ Transit and not the LightRail. The lightrail is a bus...but Hoboken is a major NJ transit terminal. Diesel engines coming in day and night? No thank you. I can't imagine that even the thicket glass will stop all that noise, and what happens if you want to open a window?

Hoboken is craziness. I would love to hear more about it...wasn't there some topic thread a few days ago about people purposely keeping information about the Hoboken real estate market a secret? It's no secret to me - there are nothing but open house signs with balloons every weekend...and the next weekend in the same spot.

1/26/2006 12:09:00 PM  
Anonymous Anonymous said...

C'mon people. Did anyone think that the NAR was ever NOT a moutpiece for the industry -- even when their forecasts were more in line with reality? That's their function! Picking on their statements is just silly.

Always consider the source. There are very few unbiased sources for RE forecasts.

1/26/2006 12:17:00 PM  
Anonymous Anonymous said...

This blog is the best thing that ever happened. Saved us a lot of money by not folowing the realtors advice (pump).

1/26/2006 01:32:00 PM  
Anonymous Anonymous said...

Right off the bat I have to say that as a RE investor that picks up foreclosure properties I really don’t worry too much about bubbles and predictions. Why?

Well the trick is to learn to buy properties at wholesale and then you have room for price appreciation and depreciation. That gives you the cushion to deal. The folks that bought the retail and took out HELOC’s will get creamed. Will the market correct? Of course it will, but it’ll happen when everyone least expects it.

Sure I watch the 10 year T-note and yes 4.5% is a critical point but how come we’re so good at finding bubbles everywhere now when we didn’t see them in 2000 on the Nasdaq? We’ve gotten so good at seeing everything as a bubble that we’re experts now, just like we were experts making IPO profits on pets.com or webvan back in the day.

Now I’m not saying that there isn’t an asset bubble and I believe a healthy correction is in order. I’m just saying that the smart money is always contrarian, if everyone is waiting for the bubble to pop it won’t. When the average Joe blows out in foreclosure, the smart money will be there to buy retail at wholesale prices.

My 2 cents.

Tom

1/26/2006 02:01:00 PM  
Blogger grim said...

Tom,

If I'm not mistaken, the contrarian position is the one that typically contradicts public sentiment and usually the unpopular position.

Thus, the bubble position is the contrarian play here, not the other way around. The public is not waiting for the bubble to pop. We are a very small minority contrary to what you might think.

Glad that you are doing well in foreclosures. Would you care to offer up some information in it? Many readers here have had questions over the past few weeks about the process.

Caveat Emptor,
Grim

1/26/2006 03:52:00 PM  
Anonymous Anonymous said...

Tom,

Go back and read the posts on message boards on some tech stocks abck in early 2000. A number of investors were calling for the demise of technology stocks.

How do you find foreclosures? We now once in the hands of realtors just another scam.
How does one talk to banks or financial companies that may own them? Right now it seems they can just list them with realtor, but will be a time when it isn't so easy to move.

1/26/2006 04:12:00 PM  
Anonymous Anonymous said...

The way I see it that public sentiment is that there is a bubble and its finally deflating, cooling off, prices coming down, etc. Perhaps I didn't make myself too clear but my main point is that if you buy "right" you won't have to worry about bubbles. I mean to say that the smart money is waiting for people to blow up before they buy up RE again.

Ok the next Q was about foreclosures.

The bestway to find foreclosures in NJ is to do the following:
1. Go to the County Record Hall and compile a list of "Lis Pendens" aka foreclosure filings weekly (thats your Notice of Default)

Or

2. Pay for a service to do it for you.

I prefer option #2 and I get a lis pendens list every week emailed to me every Sunday in Excel format.

So now what? I have a list of over 8,000 foreclosure listings since June 05. What to do with them? Well I focus on North NJ so I market postcards to them asking if they are interested in selling. Chances are 99% of them throw away my card or cure the default and reinstate the loan.

The other 1% are in denial and ignore the issue till the very end when they realize they are 4 weeks away from the Sheriff Sale, then they call me.

I talk to them and check out the the property. If its a good deal for me then I call their bank, after they authorize me to do so, and negotiate on their behalf.

They may owe $500k but the property is really worth at market for $450k. I then propose to the bank a short sale in which I pay cash of $400k to buy the property from the owner and have the bank give up the difference.

The benefit is such, the bank recoups a portion of the loan, the owner gets out of foreclosure, and I get a house at discount. For the record, these house are typically run down pieces of Sh*t. Dont expect to buy a foreclosure property in tip top shape, those get sold by realtors.

The idea is simple but its a tedious process and sometimes the bank tells you to go jump in a lake.

So is this a scam? Nope, its just debt restructuring, I'm willing to buy mortgage debt for a discount. In case you want more info, drop me an "e". I'm not selling anything, just willing to share some insights.

Tom
desertroot >>AT<< gmail.com

1/26/2006 04:38:00 PM  
Blogger chaoticchild said...

Tom,

They may owe $500k but the property is really worth at market for $450k.

How could a house worth $450k own $500k??? We are still at the peak of the bubble. Why would bank lend $ more the value of the house?

Thx for your info.

ChaoticChild

1/26/2006 06:06:00 PM  
Anonymous Anonymous said...

ChaoticChild,

Who knows why banks do that, but often I see a mortgage and a HELOC on a property.

I've seen time and time again people who have HELOC'd themselves out of all the equity in their house. They get in trouble when house prices stop appreciating and then they have to sell or worse yet lose a job or something like that.

Tom

1/26/2006 09:32:00 PM  
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