Not All Real Estate Insiders Fear the Worst
- Oct 12, 2007
Yesterday, we discussed the housing slump’s effect on real estate agents — which, in many areas of the country, isn’t looking pretty.
And yet, as the housing slump drags on, the National Association of Realtors remains overwhelmingly positive.
Just this week, the NAR said that mortgage conditions are improving and that while sales are down from their 2005 peak, 2007 will mark the fifth-highest year on record for pre-owned home sales.
That’s indicative of NAR’s other recent forecasts. In July, the NAR said it expected home prices to increase throughout all of 2008; yet it at the same time decreased its estimate for those increases from 2.6 percent to 2.2 percent.
Buyers, the NAR said, had an " overwhelming advantage" because of the large amounts of homes on the market.
That’s the most sunny spin anyone has given the overstocked housing supply in a long time — and some were quick to question NAR’s outlook.
"No one is buying into their Kool-Aid; that’s why prices are falling," Paul Kasriel, chief economist with Northern Trust in Chicago, told CNNMoney.com. "It could be that they’re going to fall a lot more. The Realtors tend to be overly optimistic. Eventually they’ll be right about prices turning around. I don’t know when prices are going to stabilize but I suspect they’ll fall more than they think this year. It may be a much better time to buy six months or a year from now."
Fast forward to September …
Tighter credit restrictions had been put into place and pending home sales had dropped, and the group had not only by this time decided 2008 home prices wouldn’t be as upwardly inclined but actually revised its existing home sales estimate from a 6.8 percent decline to an 8.6 percent one.
NAR also predicted the decline would continue through next year. However, in that same report, NAR said that existing home sales and prices and new home prices would increase in 2008 — after hitting a low point early in that year, according to Bloomberg.
Again, NAR cited the excessive amount of housing on the market –“A sharp production pullback by homebuilders deep into 2008 is a healthy trend that will help trim down housing inventory,” NAR economist Lawrence Yun said.
Sunny Sales Days May Be Here Again
With all the recent negative housing news, why would the NAR be so optimistic?
Probably in part because their life — well, livelihood — depends on it. Home prices and sales are down, but that doesn’t change the fact that Realtors are employed to sell them — and some homes are still selling in this country, albeit at a much slower pace than before and for less money.
New construction slowed to its lowest point in 12 years in August, and the bloated housing supply would indicate sales will slow further. In addition, stricter lending rules have shrunk the pool of first-time home buyers Realtors could draw from.
But does that mean the NAR’s predictions are too positive? Maybe. But then again, no one six months ago thought the housing slump would last this long: It’s hard to predict anything in the current market. And its ripple effect just keeps on spreading.
Maybe the correct question isn’t do you agree with NAR — but instead which side do you favor, hope or hopelessness?