Hiding the Ugly Truth About Housing

The Chinese water torture's got nothing on the National Association of Realtors. For months now, NAR economists have been spinning the worsening sales climate as something fictional, anomalous, and short-lived. Unfortunately, it looks to be anything but.

Existing-home sales, the NAR now says, will hit only 5.92 million units this year. Nowhere in today's press release does the NAR bother to quantify precisely what this means, so let's do it for them. Stop the presses! Here's your headline, boys!

"New home sales predicted to drop by 24%. Existing by 9%. Will probably be worse."

Why do I say worse? Because the NAR's home-sales predictions have been as useful as ice skates in Iraq, and they don't tend to err on the conservative side. They're so wrong, so often, that I started tracking them in a spreadsheet, just to document the pain. Here's how the NAR's nine months' worth of 2007 predictions stack up against last year's existing-home-sales figure of 6.48 million houses. First, the biggest chunk of the market, existing-home sales. (The last column documents the NAR's shameless headline spin.)

Existing Home Sales Estimates	Sales Estimate	Variation from 2006	NAR Spin
January	6.42	(0.93%)	"Gradual Rise Projected for Home Sales"
February	6.44	(0.62%)	"Existing-Home Sales To Improve, With Later Recovery For New Homes"
March	6.42	(0.93%)	"Housing Recovery Likely This Year, but Timing Isn't Clear"
April	6.34	(2.16%)	"Tighter Lending Standards Good For Housing but Will Dampen Sales"
May	6.29	(2.93%)	"Housing Forecast Changed Slightly Due to Impact From Tighter Lending "
June	6.18	(4.63%)	"Home Sales Projected to Fluctuate Narrowly With a Gradual Upturn"
July	6.11	(5.71%)	"Home Prices Expected to Recover in 2008 As Inventories Decline"
August	6.04	(6.79%)	"Near-Term Home Sales to Hold in Modest Range"
September	5.92	(8.64%)	"Mortgage Problems to Dampen Home Sales in The Short Term"

And while the NAR's craftily hidden doom and gloom bodes ill for millions of American home flippers stuck in bad mortgages, it looks just as ugly for homebuilders like Pulte Homes (NYSE: PHM), Hovnanian Enterprises (NYSE: HOV), Beazer Homes (NYSE: BZH), Ryland Group (NYSE: RYL), Toll Brothers (NYSE: TOL), Centex (NYSE: CTX), and all the rest. Here's how the NAR's ever-dwindling predictions for new-home sales stack up with last year's total of 1.05 million homes.

New Home Sales Estimates	2007 Estimate	Variation from 2006
January	957,000	(8.86%)
February	961,000	(8.48%)
March	950,000	(9.52%)
April	904,000	(13.90%)
May	864,000	(17.71%)
June	860,000	(18.10%)
July	865,000	(17.62%)
August	852,000	(18.86%)
September	801,000	(23.71%)

The rosy-lensed NAR predicts even sadder new home sales for 2008, at 741,000 units, or a 29% drop from 2006.

If the ever-optimistic NAR is predicting that kind of slowdown, I think it's going to be worse. We can only hope that it will be a much longer time before people are fooled into believing that housing is an "investment."