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National Association of Realtors housing bubble cheerleader and author of "Why the Real Estate Boom Will Not Bust" changes his mind and says "It’s going to get worse"
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This Link is located in the Public Channel Housing Bubble and Bear Links.
Posted by ian 1 year 198 days ago (newsweek.com). Views: 493
Tags: housing bubble david lereah real estate |
| Related Tags: credit crisis gold wall street economics peter schiff inflation banks |
It's been more than a year since David Lereah left the National Association of Realtors, so I called this week to check in. It turns out he has recently set up a new firm called Reecon Advisors, which is advising Wall Street firms and institutional investors about the real estate market. "Wall Street has an intense interest in [this], because they're looking for when is the recovery going to come, and at what point does the cycle turn," Lereah told me.
His answer: not yet. "We're not at the bottom," he says. "[People] want it to be near the bottom, but we're not there yet. The leading indicators are still very bad. Pending home sales are still in bad shape. Mortgage applications are low … There's still supply out there in abundance … This thing is going to get worse before it gets better."
Lereah says that the industry may begin to see a slight uptick in sales later this summer, which could signal the start of the recovery. Home prices, however, will continue to fall. According to the latest numbers from the Case-Shiller index, the average U.S. home has lost around 15 percent of its value since the market's peak. "We're probably going to end up with a 20 percent [decline], but if I'm wrong it will be even more than that," he says.
That's quite a turnabout from the view he articulated in his book, first published in 2005. There he argued that the solid economy, strong demographics (including immigration and aging boomers), and a lean supply of homes should lead prices to continue rising for years to come. "Today's real estate market is the result of rational decision making based on supply and demand conditions," he wrote. "With today's economy, home owners are in no danger of experiencing a widespread fallout of home prices."
Oops. "You knew there were a couple of [regional] balloons out there, and [I] said you could have a couple of these balloons pop," Lereah says now. "But I didn't think this would turn into an all-out bursting of a balloon for the whole nation." He, like other prognosticators (including Greenspan), points to his lack of understanding of the profound effects that subprime lending was having on housing markets. "[I] just didn't realize the scope, the extent, the magnitude of the loose underwriting—not looking at incomes and wages, just providing so many mortgage loans based on [expected] future price appreciation rather than the creditworthiness of the borrower," Lereah says. "That got so out of hand, and none of us realized the magnitude of it until it was too late."
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ian said |
| 1 year 198 days ago |
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