September 29, 2006

Squaring the circle: The two-faced NAR pawn David Lereah's "there is a bubble - there isn't a bubble" confusion

Reading the corrupt Mr. Lereah's latest musings on the bubble, where he "predicted" all along that we'd see an "adjustment", and that we've "now hit bottom", I was reminded of the NAR talking points he put out in December 2005 that said frankly there was no bubble.

Here's the corrupt Mr. Lereah earlier this month:

"We've been anticipating a price correction and now it's here,'' Lereah said. "The price drop has stopped the bleeding for housing sales. We think the housing market has now hit bottom.''

and this:

The housing boom ended more than a year ago, but sellers are having a tough time accepting that fact, says David Lereah,

Yet here's highlights of the NAR's "there is no housing bubble" talking points he put out in December 2005, for use by his army of 6% minions to convince the last suckers in that their investments would be safe.

Let there be no confusion HP'ers (and the MSM who love to rip-and-read his stuff): David Lereah is a seriously corrupt, never-to-be-trusted, completely discredited pawn of the NAR and REIC.

What is a housing bubble?

As broadly interpreted, a housing bubble refers to an unsustainable gain in home prices. The premise is that a price bubble is at risk of “popping,” resulting in a loss of equity.

Has there ever been a national housing price bubble?

No, not since good recordkeeping began in 1968. There was a national decline in the 1930s during the Great Depression; however, home prices were not a prime concern in that era. The greatest issues were essentials such as food, clothing, employment and shelter of any kind. Declining home prices were a natural result of a general economic collapse caused by the stock market crash in 1929.

Should we be concerned that home prices are rising faster than family income?

No. There are three components to housing affordability: home prices, income, and financing costs – the latter are historically low.

What are the prospects of a housing bubble?

There is virtually no risk of a national housing price bubble, based on the fundamental demand for housing and predictable economic factors. It is possible for local bubbles to surface under the right circumstances, but that also is unlikely in the current environment.

If conditions become unfavorable, home buying may be postponed, but a general price decline remains highly unlikely.

What is likely to happen with home prices?

The forecast is for mortgage interest rates to rise slowly over the next year, which will have a minor breaking effect on home sales. The good news is that will help inventory levels to recover and allow the market to come into a closer balance between buyers and sellers.

In other words, a general slowing in the rate of price growth can be expected, but in many areas inventory shortages will persist and home prices are likely to continue to rise above historic norms.


Anonymous said...

Auctions, Auctions, Auctions.

Builders and Developers will be turning to auctions in 2007.

Anonymous said...

In other words, a general slowing in the rate of price growth can be expected

Good God! What a shill!

First anon, for this time of year,more housing auctions in the classified sections than I've ever seen, and they are NOT estate sales! And this in a non bubble area. I can't imagine how its going to be in the formally HOT areas.

Anonymous said...

"Baghdad Dave" Lereah is no different than the doznes of "economists" paraded on CNBC all day long promoting "Now is a good time to buy stocks."

Let's face it, sheep were made for shearing and that's just what the REIC and the WSIC (Wall-Street Industiral Complex) do.

In fact, it will take years and years of falling prices, bankruptcies, pain and hardship before the sheeple finally accept that stocks and real estate DON'T always go up.

And yet, the sheeps may STILL be proven right if the Fed/feds decide to go full-tilt "Weimar Republic" and monetize/bailout Fannie/Freddie/FHLB/Private MBS issuers/homedebtors/banks/mutual funds. So, even as the sheep's house price will be the same, a loaf of bread will cost twenty-five dollars and a tank of gas will cost $150 dollars.

But the sheep will be none the wiser.

Anonymous said...

minor "breaking" effect instead of "braking" effect. Yeah it "broke" the housing market alright. Freudian slip.

In general it's a great idea to hold prognosticators to their original statements. People make bold statements and then they are forgotten in a couple months when they are completely wrong.

Anonymous said...

DOW 11740

Anonymous said...

DOW 11740

GM, Ford, Chrysler, Intel, 700 billion trade deficit, $9 Trillion national debt (not including projected health expenditures or SS) , negative savings rate, never ending war.

Other than a McDonald's hamburger (which actually may no longer be 100% American Beef), what was the last manufactured product,made in America, that you purchased?

Anonymous said...

Housing Headed to the Woodshed
By Doug Kass
Street Insight Contributor
9/29/2006 10:14 AM EDT

Editor's note: This column by Doug Kass is a special bonus for and RealMoney readers. It first appeared on Street Insight on Sept. 28 at 8:29 a.m. EDT. To sign up for Street Insight, where you can read Kass' commentary in real time, please click here.

"We do expect an adjustment in home prices to last several months, as we work through a buildup in the inventory of homes on the market. ...This is the price correction we've been expecting -- with sales stabilizing, we should go back to positive price growth early next year."
-- David Lereah, economist, National Association of Realtors

The New York Times, September 2006


Lereah, whom I debated on CNBC's "Town Hall Special: The Real Estate Boom," in April 2005, is a very nice man and a capable economist. I recently had a most pleasant conversation with him at CNBC studios two months ago prior to a CNBC Survival special on housing hosted by Bill Griffeth.

Lereah is also the author of the book Are You Missing the Real Estate Boom? Why Home Values and Other Real Estate Investment Will Climb Through The End of the Decade -- And How to Profit From Them.

Not the most timely publication, Lereah's book was published within four months of the statistical peak in housing activity and prices in 2005. In fact, the paperback version came out in February 2006, when the down cycle was beginning to escalate.

I am in no way trying to embarrass Lereah. I am just stating the facts and my opinions, like I try to do when I admit my (many) views and mistakes on Street Insight. Don't think for a minute that the National Association of Realtors' Lereah was expecting a price correction last year, as stated in this month's New York Times interview above.

Back in April 2005 (on the CNBC special), Lereah and the managements of Hovnavian (HOV) , Prudential Realty and LendingTree were fully convinced (you might say glib) that the housing market was destined for a long boom. They saw a new paradigm of uninterrupted, noncyclical growth. One month later, Lereah was quoted as saying, "We simply don't have enough homes on the market to meet demand."

That was then, and it doesn't pay to dwell on the past. So let's look into the future. Unfortunately, many within the homebuilding business continue to talk their book despite clear trends that do not support their bullish view.

Forgive my preoccupation with the housing markets, but it has had a disproportionate role in economic growth since 2000 (and maybe before). This merits a continued discussion as to the possible slope of the decline, and the nature of the inevitable recovery. The housing cycle, among other variables, is a key influence on aggregate economic activity.

I expect a hard landing, and I have roughly quantified my expectations as to when the housing market will bottom (2009). It is folly to think that an unprecedented rise in home prices (in real and nominal terms) will be over in relatively short order. Yet this has been suggested by Lereah and others.

Housing cycles are long, and they play out over many years. We have learned that the peaks are surprisingly high and the up cycles unexpectedly long. Unfortunately, so too are the depth and duration of the down cycles.

Days/months inventory have only begun to rise as the glut of homes will be exacerbated by continued overbuilding, disposition of land, and the selloff of homes by flippers. And, as discussed previously, the consumer enters the current downturn in a weak position. Consumers are highly leveraged after the overconsumption binge of the last decade and after massive cashouts of home equity.

Consider the dramatic sale of D.R. Horton (DHI) homes in the Daytona Beach market in Florida. Please note the message at the bottom of this advertisement: "Realtors Warmly Welcomed!" That's never a good sign.

These discounts include up to $90,000 a unit or as much as 30% (plus a free washer/dryer and refrigerator). This is not unusual: Most homebuilders have offered large price discounts and/or large incentives (vacations, car leases, reduced mortgage rates, etc.) for several months.

For a moment, let's suppose that you were a flipper in the Daytona Beach D.R. Horton community who owned and speculated on a few homes without the intention of moving in. You just took a 30% haircut on your inventory, not to mention carrying costs of a mortgage, real estate taxes and expenses to keep up the property (landscaping, utilities, etc.).

And when the unit is finally sold, you have to pay a real estate agent a 6% commission. That speculator likely put up less than 20% up front (probably far less), and is now out, by my calculation about 50%. But making the situation worse is this: Who wants to buy a used home when you can get a new one like one in the advertisement above?

The ramifications of an extended housing downturn are broad -- far broader than many realize. For example, the apartment REITS, a sector I am short, argue that there has been no new construction, so supply/demand favors an escalation in rents. But just wait until speculators, unable to sell their condominiums and homes, resort to renting the units.

Or consider the implications for building materials companies like Eagle Materials (EXP) , which warned on Tuesday. What about the sale of pickup trucks, which are often used on the construction trade? What does an extended downturn portend for carpet, gypsum, lumber and appliance manufacturers? Or for subprime and some prime lenders? And what do you suppose happens to the plethora of real estate agents and mortgage brokers? (Do they become daytraders again?)

You get the point: The housing decline is just beginning to be felt. The fixed-income market recognizes this. But for now, equity market participants don't. Common sense has taken a sabbatical.

Don't believe the housing soft-landing advocates, and do recognize the broad economic impact that a protracted downturn will have on our economy.

The worst is yet to come.


At time of publication, Kass and/or his funds had no positons in stocks mentioned.

Anonymous said...

Other than a McDonald's hamburger (which actually may no longer be 100% American Beef), what was the last manufactured product,made in America, that you purchased?

American Stocks

Anonymous said...

How do you square a circle?

Anonymous said...

you shove a 4x4 up a bull's Ass!

Like borka

Anonymous said...

What is a housing bubble?

As broadly interpreted, a housing bubble refers to an unsustainable gain in home prices. The premise is that a price bubble is at risk of “popping,” resulting in a loss of equity.

Well, wouldn't you know, here's his big problem - he doesn't understand what a bubble is or why they occur, not in the least! The common characteristic of financial bubbles is that they are fueled by LEVERAGE and high amounts of DEBT.

Maybe someone should send him a few links to some books at amazon so he could go educate himself.

Hagartha said...

You should let up on Lereah many people think highly of him, myself included. If not for his housing market foresight the US would be in a severe recession.

Anonymous said...

>> You should let up on Lereah many people think highly of him, myself included

There is such unbelievable stupidity in this country.

autofx in Phx said...

Hagartha said...
You should let up on Lereah many people think highly of him, myself included. If not for his housing market foresight the US would be in a severe recession.
Fools like this really exist? Guess so.

Anonymous said...

The New York magazine interviews Nouriel Roubini

Hagartha said...

"Fools like this really exist? Guess so."

"There is such unbelievable stupidity in this country."

Such mean spirited words, I detect a lot of anger here. Perhaps you should check my profile out.

Anonymous said...

If not for him we would be in a recesssion?

Are you S#itting me?

We SHOULD have had a recession in 2001 , now we will have depression due to gross amounts of leverage and debt that the FED created with thier monetary policy that was cheerleaded by Lereah.

The sheeple are being brought to slaughter, keep drinking your Kool-Aid and you won't feel a thing.

Anonymous said...

All right hagartha, your blog is pretty freaking funny.

I didn't have my sarcasm detectors on when I first read your post.

Hagartha said...

"Are you S#itting me?"

I still believe in Lereah’s predictions for the market. Just wait and see, he will be proven right by decades end.

Dr Housing Bubble said...

The L.A. Times has an article out today regarding mortgage fraud. I discuss this article on my blog

One of the staggering stats that you'll see is that the majority over stated their income by 50%. I'm sure many that frequent this blog for the past year will not be surprised by this.

Anonymous said...

"Such mean spirited words, I detect a lot of anger here."

Exasperation is expected when one's been told that their sound money ideas were false by credit-pumping media shills.

Realize, the housing bubble didn't create any new industries with sustainable growth like nanotech or biodiagnostics. Those industries were already in the pipeline during the 90s and have now been oversold to the public since a lot of R&D has moved abroad and will not generate the types of middle to upper middle class jobs like in the 70s or 80s with the invention of microprocessors and minicomputers.

hemorrhoidforhousing said...

Dear Mr. Lereah....I mean hagartha;

Isn't it a little belittling to try to make people like you on a blog like this? We all know your feeling a little dumped on now and everyone is blaming you for their losses because they took your advice, but come-on posting under a pseudo name on a bubble blog should be just downright embarassing.

It isn't people don't like you, we just think you're full of shit.

Nothing personal.

Anonymous said...

Hagartha, THAT'S GREAT!! CA, FL, and AZ as your location. I hope you get past being bankrupt and come out with a better sense of reality when this whole thing plays out.

Conspiracy by bloggers to ruin the market. Please...

Anonymous said...


Well done in a Stephen Colbert kind of way.

Hagartha said...

"Well done in a Stephen Colbert kind of way"

Thanks! I think this could have went on until Keith pulled the plug.

I am just as frustrated and fed up with this racket as the rest of you. I needed a break from being pissed off so I invested a few hours in publishing a RE Satire Blog. I’m not up to running a full time blog so I’ll eventually take it down. I hope I brought a chuckle to those of you that got it.

I hope you don’t mind Keith. Readers keep coming back to HP because they never know what’s going to happen next.

Trevor Cordes said...

If you want a good chuckle, check out one of my must-read blogger's recent comment @ as he makes some witty comments on Lereah:


Won't be much news to hp'ers but worth a view nonetheless.

Anonymous said...

No response from borka yet!

Anonymous said...


Anonymous said...

Count yur blessings!

I've had enough of that pompus blowhard!

Anonymous said...

Speaking of blowing hard.....borka, what are you doing latter?

Anonymous said...

back off on lereah, the guy's one of the most talented, well-spoken, deceitful, lying shills and sleazeballs i have ever seen in my life.

one just doesn't find this kind of shameless self-promotion everyday. why, the last time we saw this kind of bald-faced deceit was in the late '90s. man, this is great circus!!!

what will we do when he's discredited and trying to sell the remaining million paperback copies of his book on ebay for $1.99?

come on, boys, let's keep lereah on the stage; this is just too good!

JM said...

You know, Lereah didn't hold a gun to people's head and make them buy a 2-BR ranch in Bakersfield for $754,900 using an interest-only option jumbo ARM. Those homes were "bought" with the expectation that someone would be willing to pay a whole lot more for it in the near future. Greed and greed alone is to blame for the housing bubble crash, not Lereah.