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  • From: Clansgian AT wmconnect.com
  • To: homestead AT lists.ibiblio.org
  • Subject: Re: [Homestead] Home sales and prices forecast by NAR
  • Date: Tue, 12 Sep 2006 11:06:58 EDT

In a message dated 9/12/2006 7:53:58 AM Eastern Daylight Time,
genegerue AT ruralize.com writes:


> An item with which most are not knowledgeable is that Lereah bought a
> Florida condo as an investment about a year ago. That would appear to
> indicate that he believed what he was saying.

It would. I didn't know that and I can't imagine anyone making that big an
investment while not thinking the prices would remain high, not even for
cheerleading's sake.

But whether Lereah's predictions are based on deception, honest
miscalculation, or just buying into his own hype is a moot point to those who
made
financial decisions based on his recommendations.

The thing that surprises me is that raw logic would say that housing prices
can't go up that fast and that much out of line with income and there not be
consequences. Also there's the epitome of foolishness of our time of viewing
a
rise in equity in your home as if it were dollar bills oozing from the walls.

My nearest neighbor is a good example. She bought her house for $95K some
seven or so years ago. It was appraised 18 mo ago at $165K and so she refied
and took $60K cash which she spent. Now her ARM is readjusting and she can't
make the payments. If she sold the house to meet the loan, she'd have no
place
to live. And yet, you can't give away remote rural property here right now
because people are spooked that gas prices will go way back up ... and so her
house may be actually worth the original $95K or even less.

There are a million people like her. It is said that what gave the economy
such an upturn was the perception of wealth. People viewed themselves as
wealthy because the theoretical value of their homes kept going up. People
who
see themselves as wealthy spend money. There was also the perception that
ate
at people that they might be missing out on the "boom". The strongest
criticism leveled at David Lereah is the advice in his book Are You Missing
the Real
Estate Boom? (subtitled) The Boom Will Not Bust and Why Property Values Will
Continue to Climb Through the End of the Decade - And How to Profit From
Them.
In this book Lereah says that if you have a paid off home mortgage (or never
had one) you are financially unsophisticated and are missing out on money you
could be accumulating. We've all heard from real estate investors that those
of us who didn't take out equity loans on our homes to invest in other real
estate were just jealous of those who did and were making money.

But many looked at the illogic that wealth, spendable wealth, wealth for
investing was suddenly appearing out of thin air for every property owner in
the
country. The blogs that Lisa quoted in a post to this thread have been
around
for more than two years warning that the bubble was going to burst. Lereah's
and NAR's sudden surprise that the market has gotten a lot worse than they
thought still smacks to me as somewhat disingenuous.

>
> >As for national housing stats credibility, what source do you recommend?

Single source? I doubt that there is one. It's much easier to point out the
picadillos of a source than to come up with one that is credible. "Thus let
it be with Caesar .." as Brutus said. (The lack of credibility lives after
them, the accuracy is often interred with their bones... as it were). The
point
is that with the modern phenomenon of blogging, it is exceedingly difficult
to get away with much. When, as in this case, the NAR reports rosey, or not
so
dismal, stats, there are 1000 people with access and knowledge of the skewing
who immediately report it. For example to make the time that existing homes
on the market are taking to sell seem shorter, the NAR allows members to pull
their MLS listing and then relist the property as if it were a new listing.
A
clear deception.

Now we are beginning to experience the opposite of the wealth effect of the
past few years. The idea that you might miss out because real estate prices
keep going up and up and up is rapidly giving way to the idea of why buy any
real estate because prices are going down. Who knows how low they may go?
Fewer
people buy which depresses the prices further which makes more people shy
away and wait which depresses the prices further etc. The effect on consumer
spending might turn out to be grim.

I've gleaned the blogs from which Lisa quotes and other sources and, like
many, come to my own conclusions. Foremost is the debunking of the notion
that
it's only a local phenomenon. Worse in some places, I suppose, but happening
all over. The blogs mainly consist of newspaper blurbs, radio and TV
interviews, and the like. The thing as a whole reads like the script for
Stevem
Martin's 'The Jerk':

The housing market is sound. Prices keep going up, sales keep going up, and
demand is high.
Except Florida of course.
But other than Florida, prices are high and sales are good.
Excep Southern California.
Other than Southren california and Florida sales are good and values are
increasing.
And Washington.
But sales are good, except Florida, Washington, and California.
And the midwest.
(Etc. etc. until finally now of days)
Sales are good. Equity continues to go up. Except in Florida, Hawaii,
California, Alaska, the South, Eastern Seaboard, Wyoming, Seattle, Texas, the
MidWest, Arizona-New Mexico, expensive houses, beginning houses, condos, new
homes,
existing homes, New York, the Great Lakes area, and Atlanta.
But other than those places equity is up and sales are brisk. So you see
it's just a local phenomenon.




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