Charting the Housing Spin

Again with the NAR
In an article earlier today, I pointed out that the National Association of Realtors is sounding desperate these days. The 6% home-sale skimmers are taking pains to make housing look like a good "investment," even though the NAR's own predictions call for a worsening market. In its latest press release, NAR Chief Economist Lawrence Yun, the trade group's new and improved David Lereah, tries to argue that homes are better investments than stocks. I won't take too much time to point out how specious his argument is, beyond pointing out that stocks, unlike homes, operate on a highly liquid market.

Moreover, they pay dividends, they don't require thousands of dollars in yearly maintenance and property taxes, and finally, let's note that Yun's bogus return rate for housing depends entirely on the leverage people use to buy homes. Buying stocks with major leverage would boost returns far beyond the alleged payoff from a home. But that, of course, would be a risky thing to do -- just like buying an expensive home at the top of a market with no money down and an ARM, as so many Americans did over the past couple of years.

Numbers don't lie, unlike the writers of some press releases
But back to the NAR's numbers. The organization that thinks it's always a great time to buy nevertheless doesn't seem to feel like it's ever a good time to put its sales predictions in context.

I'm here to help the NAR out, and by "help," I mean "illustrate, in the NAR's own words and figures, how the trends in its predictions makes its look downright ridiculous." Let's start with existing home-sales predictions.

Estimated 2007 Sales

Diff. From Prior Month

Difference From January Prediction

Difference From Prior Year

NAR Spin

January

               6,420,000

   

 (0.93%)

Gradual Rise Projected for Home Sales

February

               6,440,000

 0.31%

 0.31%

 (0.62%)

Existing-Home Sales To Improve, With Later Recovery for New Homes

March

               6,420,000

 (0.31%)

 0.00%

 (0.93%)

Housing Recovery Likely This Year, but Timing Isn't Clear

April

               6,340,000

 (1.25%)

 (1.25%)

 (2.16%)

Tighter Lending Standards Good for Housing, but Will Dampen Sales

May

               6,290,000

 (0.79%)

 (2.02%)

 (2.93%)

Housing Forecast Changed Slightly Due to Impact From Tighter Lending

June

               6,180,000

 (1.75%)

 (3.82%)

 (4.63%)

Home Sales Projected to Fluctuate Narrowly With a Gradual Upturn

July

               6,110,000

 (1.13%)

 (4.83%)

 (5.71%)

Home Prices Expected to Recover in 2008 as Inventories Decline

August

               6,040,000

 (1.15%)

 (5.92%)

 (6.79%)

Near-Term Home Sales to Hold in Modest Range

September

               5,920,000

 (1.99%)

 (7.79%)

 (8.64%)

Mortgage Problems to Dampen Home Sales in The Short Term

October

               5,780,000

 (2.36%)

 (9.97%)

 (10.80%)

Improvement in Mortgage Market Bodes Well for Housing in 2008

November

               5,670,000

 (1.90%)

 (11.68%)

 (12.50%)

Modest Recovery for Existing-Home Sales in 2008 as Credit Crunch Subsides

Hmmm. How's that for an investment opportunity? Lever up with a risky mortgage, and then enter a market where the supposed "experts" continually drop their sales predictions, which now stand at a 12.5% drop from last year's actual sales, and 11.7% below what the NAR cheerleaders expected in January.

From ugly to fugly
Things look even worse for new-home sales. Here's what the NAR's constantly shifting story there has looked like.

Estimated 2007 Sales

Difference From Prior Month

Difference From January Prediction

Difference from Prior Year

January

                  957,000

   

 (8.86%)

February

                  961,000

 0.42%

 0.42%

 (8.48%)

March

                  950,000

 (1.14%)

 (0.73%)

 (9.52%)

April

                  904,000

 (4.84%)

 (5.54%)

 (13.90%)

May

                  864,000

 (4.42%)

 (9.72%)

 (17.71%)

June

                  860,000

 (0.46%)

 (10.14%)

 (18.10%)

July

                  865,000

 0.58%

 (9.61%)

 (17.62%)

August

                  852,000

 (1.50%)

 (10.97%)

 (18.86%)

September

                  801,000

 (5.99%)

 (16.30%)

 (23.71%)

October

                  804,000

 0.37%

 (15.99%)

 (23.43%)

Again, this should come as a surprise to no one who's followed the problems at builders such as Centex (NYSE: CTX  ) , Ryland Group (NYSE: RYL  ) , or Toll Brothers (NYSE: TOL  ) . Houses aren't selling like they used to, nor are they getting the prices they used to. That's because lenders such as Countrywide Financial (NYSE: CFC  ) and IndyMac Bankcorp (NYSE: IMB  ) aren't spreading subprime and Alt-A loans out the way they used to. Peers such as Novastar Financial (NYSE: NFI  ) and Impac Mortgage Holdings (NYSE: IMH  ) have pretty much pulled the blinds and given up.

Foolish final thought
So there's no glut of low-end money to keep pushing prices up, which means the end of the great housing Ponzi scheme of this decade. The builders know it. The banks know it. Even the NAR knows it. Just don't expect them to explain it to you in plain English, as these tables do. Straight talk is bad for Realtors' pocketbooks.


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