Hiding the Ugly Truth About Housing
By Seth Jayson September 11, 2007
Motley Fool
The Chinese water torture’s got nothing on the National Association of Realtors. For months now, NAR economists have been spinning the worsening sales climate as something fictional, anomalous, and short-lived. Unfortunately, it looks to be anything but.
Existing-home sales, the NAR now says, will hit only 5.92 million units this year. Nowhere in today’s press release does the NAR bother to quantify precisely what this means, so let’s do it for them. Stop the presses! Here’s your headline, boys!
“New home sales predicted to drop by 24%. Existing by 9%. Will probably be worse.”
Why do I say worse? Because the NAR’s home-sales predictions have been as useful as ice skates in Iraq, and they don’t tend to err on the conservative side. They’re so wrong, so often, that I started tracking them in a spreadsheet, just to document the pain. Here’s how the NAR’s nine months’ worth of 2007 predictions stack up against last year’s existing-home-sales figure of 6.48 million houses. First, the biggest chunk of the market, existing-home sales. (The last column documents the NAR’s shameless headline spin.)
Existing Home Sales Estimates
Sales Estimate
Variation from 2006
NAR Spin
January
6.42
(0.93%)
“Gradual Rise Projected for Home Sales”
February
6.44
(0.62%)
“Existing-Home Sales To Improve, With Later Recovery For New Homes”
March
6.42
(0.93%)
“Housing Recovery Likely This Year, but Timing Isn’t Clear”
April
6.34
(2.16%)
“Tighter Lending Standards Good For Housing but Will Dampen Sales”
May
6.29
(2.93%)
“Housing Forecast Changed Slightly Due to Impact From Tighter Lending ”
June
6.18
(4.63%)
“Home Sales Projected to Fluctuate Narrowly With a Gradual Upturn”
July
6.11
(5.71%)
“Home Prices Expected to Recover in 2008 As Inventories Decline”
August
6.04
(6.79%)
“Near-Term Home Sales to Hold in Modest Range”
September
5.92
(8.64%)
“Mortgage Problems to Dampen Home Sales in The Short Term”
And while the NAR’s craftily hidden doom and gloom bodes ill for millions of American home flippers stuck in bad mortgages, it looks just as ugly for homebuilders like Pulte Homes (NYSE: PHM), Hovnanian Enterprises (NYSE: HOV), Beazer Homes (NYSE: BZH), Ryland Group (NYSE: RYL), Toll Brothers (NYSE: TOL), Centex (NYSE: CTX), and all the rest. Here’s how the NAR’s ever-dwindling predictions for new-home sales stack up with last year’s total of 1.05 million homes.
New Home Sales Estimates
2007 Estimate
Variation from 2006
January
957,000
(8.86%)
February
961,000
(8.48%)
March
950,000
(9.52%)
April
904,000
(13.90%)
May
864,000
(17.71%)
June
860,000
(18.10%)
July
865,000
(17.62%)
August
852,000
(18.86%)
September
801,000
(23.71%)
The rosy-lensed NAR predicts even sadder new home sales for 2008, at 741,000 units, or a 29% drop from 2006.
If the ever-optimistic NAR is predicting that kind of slowdown, I think it’s going to be worse. We can only hope that it will be a much longer time before people are fooled into believing that housing is an “investment.”
I read this article yesterday on a yahoo news link posted on some bulder stock quotes and it made me think of one thing. What a bunch of geniuses we are on this site. Look at the numbers, they get progressively worse and the past few months they are dropping like a rock. Anyone looking to invest can read dozens of stories like this every day and see how obvious the decline is and how it is picking up downward steam. Looking back to earlier in the year, the numbers were pretty flat and they weren’t obvious, yet if you had read the threads here in March, there was absolute certainty from the majority that this is where things were headed. I like the authors style but he has the benefit of looking into a rear view mirror, I would have been more impressed if he had written this in March, because Roubini and Shiller were writing and saying exactly this. On those two, have you noticed the increased respect when doing interviews they now get, no longer are they regarded as crackpots and few even dare challenge them.
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