This is from Robert Shiller of the S&P Case/Shiller home price index.

http://www.bloomberg.com/news/2011-06-09...rprise-me-.html

I can not say that I disagree. It is going to get uglier before it gets better.

We are down 10% year over year in my market and close to 50% from the peak. I wish the free fall would stop but I think we have a ways to go.

Our board sent out the NAR rebuttal to everyone today for us to use to counter this data.

I don't think we are as rosy as the NAR info wants people to believe.

http://columbusrealtors.com/NewsDetail.aspx?article=20676608

Gee NAR thinks everything is wonderful? Who'd A Thunk It

I guess NAR thinks they haven't lost enough credibility.

As I recall NARs "Economist" was saying things were peachy in 2006 going into 2007. Hmmmmmm.

Yeah, it would probably be better if they just stayed out of the prediction/forecasting/analysis business and focused on educating real estate brokers to help improve the quality of service, transaction skills etc. I don't really pay any attention to what their economist says etc, but it is still sort of demoralizing knowing that they are always trying to put this rosy spin on everything. It would be a breath of fresh air if they came out and said there is a heck of a good chance values will drop 15%+ over the next year or so - "so make sure your buyers are prepared and plan to stay put for 10 years!" what's so wrong with that?

That would have been David Lehreh who left in 2006 or 2007 to be replaced by Lawrence "I'll find some good in there somewhere" Yun.
By the way, Lehreh lost an investment property to foreclosure in 2008, which if I remember correctly was somewhere in the Virginia suburbs of D.C.

This is a reprint of an article I submitted on the NRBA Web site. It should leave very little doubt that in my opinion, NAR...Not About Realtors.
Article starts.

Just when I thought that everyone was up to speed regarding the state of the housing market, I receive a copy of this NAR article.

NAR EXCERT BEGINS

NAR explained their methodology: The map shows the number of months it would take to clear the shadow inventory by state. The months’ supply is estimated by dividing the shadow inventory and the monthly number of distressed sales. The numbers range broadly from 51 months in New Jersey to 7 months in Nevada. When looking at months’ supply it is important to keep in mind that this estimate highly depends on saturation of distressed sales. Given that New Jersey over the past year on average reported about 20 percent of existing home sales to be distressed sales, it will take a longer period for the shadow inventory to clear. In contrast, Nevada’s distressed sales averaged a considerable 70 percent share of the existing sales and at that rate the current shadow inventory would clear in 7 months.

Bottom Line

Appreciation of residential real estate will not take place until a region works their way through the shadow inventory that exists. This map gives you an indication of when that will occur in your state.

NAR EXCERT ENDS

I thoroughly enjoy reading, particularly fiction. I recall being completely fixated with “Rip Van Winkle” as a youngster. I suppose one major difference is that Mr. Van Winkle eventually woke up and faced reality.

In the opinion of this writer, NAR’s outlook is totally skewed. I base that opinion on many other industry sources, some basic math and common sense.

Per NAR, Massachusetts has a 21 month supply of shadow inventory. I’ll focus on MA. Since that’s my home state.

Let’s reduce this to simple numbers. 210 homes in an area, selling 10 a month equals 21 months to cleanse the shadow backlog (per NAR). Just add zeros for a bigger picture.

However, that assumes that during those 21 months no more properties are foreclosed on. If one is receiving 10 per month currently, plus 10 from shadow, the projection months either double or the percentage of the market dominated by REOs doubles. Based strictly on my own REO inventory vs. sales, I’ve been carrying a year’s supply of product for the past 4 years. In other words, the number of REOs coming down the pipeline has pretty much mirrored the sales. Moreover, as shadow is released, in conjunction with the normal flow of foreclosures, conventional sales would most probably slow which may very well result in more foreclosures.

Think of it from this point of view. We have a large vat of water (REOs). Based on a specific drainage rate, one could conclude that said vat will be run dry in 21 months. This sounds quite reasonable. However, it ignores the fact that while the vat is draining from one end, it’s being refilled from the opposite end. It also fails to consider the fact that shadow inventory has been increasing steadily. The fill rate of the vat has exceeded the drain rate; hence what was once a vat is now a reservoir.

Further, the shadow numbers are current bank owned properties that are not yet on the market. It does not necessarily take into account the number of loans in default that should have been foreclosed on and would be in inventory, had the process not been stalled due to governmental “help”. Procedural tie ups, such as the recent affidavit issues and other stutter steps we’ve experienced, have further exacerbated the issue. The average time line, based on multiple industry sources, between default and foreclosure exceeds 500 days. Just what would the time line be if ALL the loans 30 days in default were included? Triple, 4 fold or???

Back to MA. and the stutter steps or sticks placed in the spokes of the free enterprise bicycle, AKA governmental intervention in this fine state. The 150 day right to cure, 90-120 days for a loan mod effort, 90-120 more days for a short sale or deed in lieu efforts, 90-120 days from the NOD date to foreclosure. 14 to 17 months of pre-shadow inventory or “waiting to foreclose but can’t yet” inventory. PLUS 21 months of current shadow equals 38 months of REO backlog. And this does not take into account the backlog in FCs associated with robo-signing, litigation delays, and other tactics that are often postponing the inevitable. And that further assumes no new defaults.

Perhaps and probably my figures are not entirely accurate. But the fact remains the NAR predictions are overly optimistic. 21 Months is still a gloomy picture in spite of the fact that they skew the numbers to make it look as good as possible.

Why the need to paint an overly rosy picture here? Why not just face the reality that all is not well in Camelot, and we may be in for a protracted period before we see some sense of normalcy. Perhaps the answer to those questions is income driven. We’re all aware that many are fleeing the industry now that it requires talent to maintain any meaningful level of sales. Perhaps the need to prop up membership is what prompted the NAR’s call to spread the REO wealth. Those of us that have spent years honing our skill and developing credibility are now asked to share this niche market. Similar to a call 10 years ago that an agent with a 50 lot subdivision, that had developed a strong relationship with the builder community, should spread those listings among 25 of their counterparts. Okay, I admit it, they never made that call 10 years ago, but you get the picture. Nor did I expect the relationship other agents developed with their builders to be torn apart and segmented out to those that did not understand the nuances of new construction. My, how times have changed. But if NAR is to protect their income stream and stem the exodus of dues paying members, the measures must be extreme. Hence, the need to expound that all is fine, and hope enough agents buy into the myth and stick around with their checkbooks handy.

Just a quick history lesson here and some paraphrased NAR comments…There is no housing bubble…sales are strong and will continue…prices shall continue to rise…and perhaps NAR saw the Easter bunny last Sunday.

It would not surprise me if NAR concluded that Jeffrey Dahmer merely exhibited poor taste. Well, that about ends this rant. Back to reading about Mr. Van Winkle.

When I talk to people they say "Oh the market is just horrible".

My reply is "It depends on who you are".

Common folk sadly follow the heard mentality.When NAR says it is rosy they want buyers to have the perception to buy.

Even if prices decline some more buyers need to analyze cost of debt moving forward.If you wait another year to purchase and prices fall another 15,000 but interest rates rise 200 basis points have you really gained anything??

So you have to watch have far prices will decline versus cost of debt if you will be borrowing to purchase.


Investors right now nationwide LOVE this down market.They are buying up properties in droves.It is one of the best buying cycles I will probably see in my lifetime.

I am loading up on properties as well.In every real estate cycle there are winners and losers.

Very well put. We use the cost of the mortgage interest rates when we advise buyers. If I recall correctly on a $100K home a 1% increase in interest rates equates to about $10,000 in sale price reduction.

There are also some who believe that if interest rates go up it will free up more mortgage money due to the fact that the banks do not want to lock in a 5% return on a 30 year loan when they can reasonably expect that in 10 years they could be making significanly more on the same money.

More Mortgage money available equals less difficulty for buyers to get a mortgage. However, it will be at a higher price.

All just IMHO.

You forgot to mention that you dont do BPO's anymore.

I think @ 10% may be realistic before we reach a long plateua, 25% is ridiculous, might as well state *we will give you $$$ to buy a house* - on the other hand, who knows?????