Home Sales Report: National Association Of Realtors Clueless?

If you want to see how clueless the NAR’s Chief Economist is (as are many in the Real Estate Industry), look no further than the recent home sales report:

(From the NY Times): “The National Association of Realtors said its seasonally adjusted index of pending sales for existing homes fell 3.2 percent to a reading of 86.5 from an upwardly revised June reading of 89.4. The index was 6.8 percent below year-ago levels.

Home sales are considered pending when the seller has accepted an offer, but the deal has not closed. Typically there is a one- to two-month lag before a sale is completed.

Wall Street economists surveyed by Thomson/IFR had predicted the index would fall to 88.6. The index, which sunk to a record low of 83 in March, stood at 92.2 in July 2007.

Lawrence Yun, the trade group’s chief economist, forecasts that home sales are on a pace to fall 11 percent from last year to just over 5 million in 2008. Mr. Yun said stringent lending criteria by Fannie Mae and Freddie Mac — the mortgage finance companies taken over by the government this weekend — held back sales activity.

Many in the real estate industry are hopeful that these standards will be relaxed with Fannie and Freddie under government control, but the outlook remains uncertain.”

Hello McFly , lax lending standards are large part of the reason we have a credit crunch, housing crisis, et al, not to mention the fact that the mortgage GSEs did (in fact) increase their investment activities over the past 12 months and nearly went under despite their allegedly “stringent” lending criteria.

Blaming the GSE’s lending criteria for a slowdown in home sale is idiotic when the real truth is that housing is going through a necessary correction after a period of hyper-inflation driven by bad lending standards, and people spending above their means, a reality that few (apparently) wish to accept. Not to mention the fact that asking for the GSE’s lending criteria to be relaxed is asinine, when it’s plainly obvious to anyone who has a solid grasp of 4th math that what the GSEs need to do is reduce their scope, drastically curtail their investment activities and focus on getting their finances in order.

Anyone pushing for the GSEs to relax their standards increase their investment activities/scope, etc, is practically begging for disaster

Unfortunately I hold the minority opinion on this one, because the government is pushing to expand the size of the mortgage GSEs investment portfolios (a move that is supported by many) and will (in all likelihood) create a bigger economic calamity down the line.

As for the NAR’s report itself the results aren’t especially surprising, and they’re a clear example of why it’s better to focus on multi-month trends as opposed to declaring a housing bottom based on the data from one month.

You can read the entire article here.

Sources :

The Associated Press (Via the NY Times): “Pending Home Sales Declined in July” — September 9, 2008.

Disclosure: at the time of publishing the author didn’t own a position in any of the companies mentioned in this article; the ideas expressed are solely the opinions of the author and shouldn’t be viewed as financial or investment advice.

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