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powayseller.
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July 19, 2006 at 9:37 PM #6939July 19, 2006 at 10:13 PM #28923
powayseller
ParticipantDo you think the NAR is getting the public ready to accept the housing bust? They have to gradually prepare us. This survey could be the way they did it. After all, the questions were posed by NAR, and their purpose was to show the serious situation of housing.
Does NAR want to pressure the Fed to lower interest rates? David Lereah talks about the problems of rising interest rates.
July 19, 2006 at 10:49 PM #28927rankandfile
ParticipantThis report has government bailout written all over it. When I first saw the title of the post I was expecting to read some wacky survey by the NAR that showed how people thought home prices were reasonable, or something crazy like that. However, seeing the information that they came up with and how some of the data is summarized, it smells like they are trying really hard to work a political angle here (e.g., home prices being a voting issue, people wanting more affordable housing, etc.).
It’s hilarious that they mention nothing of the fact that the grossly over-priced homes are due partly to the actions of realtors themselves, one of the main groups who directly benefit from exhorbitent home prices! Now they are taking an indirect (and most likely orchestrated) approach to drumming up government support for affordable homes. I particularly like how their survey showed that high home prices has led to a decrease in productivity! Classic!
July 20, 2006 at 8:39 AM #28965ParticipantNow I see. They are preparing to ask for government grants for affordable housing, as a way to boost sales.
July 20, 2006 at 9:19 AM #28973lamoneyguy
ParticipantOr bailouts for mortgage owners in over their heads. Last thing NAR wants is a wave of foreclosures.
July 20, 2006 at 9:30 AM #28977Bugs
ParticipantGeez, they really can’t win, can they? We complain about it when they spin the data and we look for ulterior motives when they don’t.
I don’t trust the PR machine either, but that doesn’t have to mean that everything they put out is tainted. Could you consider the possibility that maybe they played this one straight down the middle and aren’t trying to spin anything?
It could happen. Maybe they’re trying to give their members the straight scoop so they can plan accordingly.
July 20, 2006 at 9:21 PM #29043ParticipantMaybe Bugs, but it would be a sudden reversal. Sudden. Why?
July 20, 2006 at 11:50 PM #29053ParticipantBugs, it’s nice to see that you give the benefit of the doubt when posting. Maybe you just have a longer fuse than the rest of us. But you must consider the organization producing the study, the people on this post reading it, and the overall context of the housing situation. When you read 99 articles and they all lean one way, and then suddenly you get 1 that leans (or appears to) the other way, how do you expect us to react? Try replacing the word “houses” with something like guns (or another item such as gas), and replace the NAR with the NRA (National Rifle Association). How would you perceive the study, then, when the NRA says that the high price of guns is a voting issue? The point here is that the very group that probably benefits the most from high home prices has come out with a study that APPEARS to be self-defeating. Wouldn’t you be at least a little skeptical?
July 21, 2006 at 1:56 AM #29058ParticipantSometimes a politician leaves the microphone on. Sometimes eyewitnesses come up with different descriptions of the suspect. Sometimes one hand doesn’t know what the other hand is doing. Even an idiot is sometimes right and even a liar sometimes tells the truth. In the real world these things just happen.
Of course I’m skeptical, but I’m trying to look at the information itself to see if it jibes with what I’ve already seen and I try to question it’s source separately. I’m accustomed to seeing conflicting and contradictory indicators out there and the only rational way for me to reconcile those strays is to realize it’s not all going to come out in shades of either black or white.
This could indeed be a conspiracy by NAR to open a new marketing angle from which to profit. I may be very suspicous of their motives. However, I’ve learned that hard way that the more I publicly dally with accusations I can’t back up, the more likely it is that I’m going to occasionally be proven wrong on those accustations in an equally public manner. Much easier to stick to the information first and deal with it’s sources as a secondary point of interest.
In my opinion.
July 21, 2006 at 8:52 AM #29069ParticipantOpen mics are an accident, preparing questions for a phone survey are not.
This survey was metiuclously planned and executed, and then the results were marketed and published.
So the question is: why did the NAR reverse course on it previous message that housing is hot, there’ll be a soft landing, and this is a good time to buy? I remember last month Lereah first mentioned that rising interest rates could hurt housing, sort of hinting that the Fed should stop raising rates to save housing and the economy.
The Senators questioning Bernanke brought this up. Sarbanes had been lobbied by the NAHB, and showed a chart that showed new home starts falling off a cliff. He said that the NAHB explained to him that the drop in housing sales is causing rents to go up, raising the CPI, causing the Fed to raise rates to reduce CPI, lowering housing sales and creating a vicious cycle. From this comment I realized that the industries are definitely lobbying these senators.
Bernanke’s response was the CPI is only one indicator they use, and that the PCE is more accurate since it excludes rents. He emphasized repeatedly that they look at many factors, not just the CPI. They consider the markets, anecdotes, statistical modeling, prediction of future events, surveys of consumer perception of inflation, and many data inputs of wages, productivity, purchasing prices… So he’s really not a dufus who just looks at CPI, he’s too smart for that.
July 21, 2006 at 9:23 AM #29079uncle_git
ParticipantIt’s a plea to stop the fed raising rates.
All of it’s geared towards saying “Voters will lose their homes unless rates stop rising”
They are trying to get political pressure applied to the Fed to stop the rate hikes.
July 21, 2006 at 6:28 PM #29191ParticipantYes, I think you are right. Thanks.
July 21, 2006 at 7:08 PM #29196Anonymous
GuestChris Johnston
The government is not going to bail out housing, or any other asset class bust. They cannot micromanage every little thing, and they won’t. I just urge everyone not to get too carried away with extreme predictions. Remember we have never had anywhere near the types of % drops you are talking about. You are predicting something that has never occurred previously. That is a “it’s different this time argument.
We do have a tough time ahead, but it will not be a world ending depression and housing is not going to drop 50%. Be prepared if we do get a 30% drop to be ready to go in and buy, that would be a gift if we get it.
I have stated this many times before, but I will again. If we get a 50% drop, it will be the worst depression in history. Many of the people in this forum will not have their jobs in that scenario, so would not be able to buy a home anyway.
I know it is easy to get carried away with extreme predictions. I fight that constantly as a trader. What that does to you mentally is make you hesitant to pull the trigger on something once it moves alot, because you think it is going much further. If we do get a 30% drop, trust me, it will be very hard to buy a home because the economy and general mood will be so bad, it will be a scary time.
Keep a level head, monitor what is happening, and follow your gameplan. If you do not have one, get one and stick to it come hell or high water.
Just a side note, the 30 yr Bond has staged a very nice rally off the lows, and is on the verge of breaking it’s downtrend. If it does break out, we have a solid backdrop for a declining long rate environment, and fall stock rally. We still need to go aways, but there has been some big time buying here in the last 2 weeks. If it goes a bit further and sticks, we have reversed the uptrend in long rates.
I will be watching this closely and keep everyone informed on the latest.
July 21, 2006 at 10:50 PM #29237ParticipantChris, every asset bubble in history has reverted to its mean. Can you find any exceptions? For your statement that we will have a 30% drop, would mean it is different this time. NASDAQ is still below the 2000 peak.
And the Fed won’t care about a million or 2 mil homeowners losing their homes, because they look at national numbers. They let the stock market lose $7 trillion. Millions of people lost their retirement savings. This time, millions of people will lose their retirement equity.
The only reason to save housing would be because housing drives the economy. But with rising oil and commodities prices, inflation will stay high and they cannot lower rates. Remember that 7% is our usual interest rate, so we should not expect the once-in-a-lifetime 1%-5% rates to come back. The low rates were an anomaly. I don’t think our economy could handle another big bubble like this, because our trade deficit would really get big, and would foreginers keep buying our dollars if that happened?
I predict a 50% drop, to get back at a wage/median price ratio of 7. I don’t see wages going up by more than 3% annually, so it’s housing that will take the loss. With lending standards tightening after this mess, who can afford 10% of $400K? How many Americans have $40K laying around? Prices will have to drop a lot so people can afford to buy houses with 30 year fixed rate mortgages. Without exotic lending, you cannot have prices more than 3.5x wages; you qualify for a mortgage 3.5x your annual salary under the old lending guidelines.
We will return to the 7 multiple, and it won’t be achieved by wages getting higher. So Chris I ask you, what makes it different this time?
July 21, 2006 at 11:22 PM #29246North County Jim
ParticipantBut with rising oil and commodities prices, inflation will stay high and they cannot lower rates. Remember that 7% is our usual interest rate, so we should not expect the once-in-a-lifetime 1%-5% rates to come back. The low rates were an anomaly.
Your certainty continually amazes me. What you state is plausible, not certain. I would go as far as to say that it’s not even probable.
I’m not certain of how things will play out on a macro level but you ought to consider these questions.
Is it inflationary if noone is borrowing regardless of commodity prices?
Will growth in demand for oil and commodities continue in the face of the severe recession you predict? Please explain how you get to $200 oil in a recession.
Is it possible that the higher interest rates of the 70’s through the 90’s are the anomaly?
I don’t know the answers and neither do you.
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