Rose-Colored Glasses Now Optional for NAR Monthly Forecast
- Feb 07, 2008
The National Association of Realtors released its monthly report of home sales today, and the housing outlook for 2008 is pretty negative–even for the typically sunny real estate agent organization.
This is the group, of course, that has been criticized for its ever-present optimism. Remember in July, when NAR said it felt home prices would increase throughout all of 2008, even as it decreased its estimate for those increases from 2.6 to 2.2 percent?
Or that time in October when NAR said mortgage conditions were improving and that we’d see a market correction in early 2008? (That statement was made as it reported that total existing home sales had fallen by 1.2 percent to a seasonally adjusted annual rate of 4.97 million units: the lowest sales pace on record, according to BusinessWeek.)
This is the group who–as the summer wave of declined home sales and housing slump fears loomed–said that buyers had an "overwhelming advantage" because there was such a large amount of homes on the market. (Those homes have since partially been blamed for prolonging the slump by killing demand for residential building.)
And yet, NAR Chief Economist Lawrence Yun said in a statement Thursday that "existing home sales have moved narrowly since last September."
NAR Now Sees a More Harsh Housing Reality
NAR’s reputation for being slightly overzealous may be fading by the month–or it will, if the group’s reports continue to forecast as dour a housing situation as the past few have.
The NAR forecasts have, in fact, begun to show that the group finally is starting to acknowledge the severity and duration of the housing crisis.
Last month, as NAR released its forecast report, bad housing news abounded:
- Builder Lennar Homes had just posted a $1.2 billion quarterly loss.
- Commerce Department figures released the day before showed single-family houses had dropped 4.7 percent in December and that 2007’s sales were down a whopping 26.4 percent from 2006.
- And, according to the Washington Post, demand had fallen so low in the past two years that 12 of the nation’s larger builders gave up 1.1 million lots–about 45 percent of their land inventory.
And yet, NAR said prices for pre-existing homes would be flat in 2008, with a market improvement occurring in the middle of the year. In the past 30 days, reality has sunk in: Now the group says prices are slated to drop 1.2 percent in 2008.
NAR before forecast existing home prices would fall 5.3 percent in the first quarter; this month, it’s thinking 6.1 percent.
Despite the deals, consumers will buy less pre-existing homes in 2008, according to NAR, who feels home sales–including single-family, townhomes, condo and co-ops– will drop by 4.8 percent in the year.
Last month, NAR announced expectations that existing home sales would increase in 2008 by 0.9 percent, according to CNNMoney.com.
The group did predict Thursday that home sales will rise in the second half of the year from 4.9 million to 5.8 million. But, then again, NAR had previously forecast that 2008 existing home sales would be 6.64 million.
This week, new homes got an even darker verdict: The group predicts median prices will drop 4.3 percent and sales will fall a drastic 17.7 percent. Yikes.
In short: According to NAR, we’re in for a long year.
But Don’t Worry, NAR Isn’t Turning Into That Friend Who Calls and Complains All The Time
There was, however, one spot of NAR’s characteristically rosy thinking in today’s report: After unloading all the housing doom decrees, the group said that it does not expect the U.S. economy to fall into a recession. The group projects U.S. GDP growth at 2.2 percent in 2008 and 2.7 percent in 2009.
Well, maybe–our growth hopes remain to be seen. Watching NAR come to terms with the housing crisis has been a slow process, but a significant reminder that this beast is bigger than any we’ve seen before.
No one thought the slump would last this long–certainly no one hoped it would–and you almost have to admire NAR for its steadfast commitment to putting forth a happy face as the rest of the industry panicked.
Consumer confidence has been a key concern during the recent financial and housing market upheavals; maybe a little positive thinking was just what we needed.
Or was NAR being unrealistic and tainting market comprehension? It’s a closely watched housing indicator–in a wildly volatile market. And thus, questions remain: Should the NAR forecasts have been as harsh as this month’s since last summer? Did the group have a larger responsibility to be less sunny and more severe?