‘Bad Year’ For A Pep Rally In Florida
The Sun Sentinel reports on the reaction to one economists speech yesterday. “Florida’s housing market probably won’t improve in 2006, but the long-term outlook remains promising, the chief economist for the National Association of Realtors said Thursday. ‘Is this a bad year? Yes,’ David Lereah told more than 400 people in West Palm Beach. ‘Are you going to bust? No.’”
“Lereah predicted that price increases for existing homes in South Florida will fall to about 5 percent and that sales declines in many markets will continue at double-digit clips. The state’s housing industry should pick up in the middle of 2007, Lereah said. ‘Particular markets may not, depending on inventory levels,’ he said.”
“Listings have more than doubled in Palm Beach County. The situation is even worse in Broward, where listings have more than tripled.”
“Lereah blamed Wall Street analysts and the media for perpetuating negative hype regarding the housing slowdown. ‘They’re telling us we’re in a bubble and that we’re going to come crashing down,’ he said. ‘There is nothing that could be further from the truth.’”
“Some question the economist’s alliance with the Realtors trade group and the fact that he wrote a book titled ‘Why the Real Estate Boom Will Not Bust; And How You Can Profit From It.’ But Lereah insists he’s not being unfairly optimistic. Although he remains positive about Florida, other areas, such as San Diego, could face sustained slowdowns because of flawed market fundamentals, he said.”
“Mike Morgan, a Stuart broker with clients in Palm Beach County, said it could be two years before the housing market rebounds. He said it’s so slow that builders are paying buyers’ mortgages for six months and giving agents double commissions. Individual sellers also are offering incentives. Lereah is not preparing the industry for rough times ahead, Morgan said. ‘It was more of a pep-rally speech than anything else.’”
‘Some question the economist’s alliance with the Realtors trade group and the fact that he wrote a book titled ‘Why the Real Estate Boom Will Not Bust; And How You Can Profit From It. Lereah blamed Wall Street analysts and the media for perpetuating negative hype’
Quite a change in the press approach to this economist.
David Lereah is a great contrarian indicator.
Watch where he goes to work next and it will be the next bubble.
He wrote a book during the tech bubble pumping it as well.
When that ran out he worked at NAR and pumped this bubble.
Where is his next employment gig?
Get in on the ground floor of the next bubble.
Gold only goes up. There not making any more copper. Silver is always a good investment.
With any investment don’t be a true believer. Be ready to change your position quickly. A true believer will always be the best sacrifice as they walk willingly to the altar of their impending demise.
Lereah’s book reminds me a lot of “Dow 36,000: The New Strategy for Profiting From the Coming Rise in the Stock Market”, which was published in 2000. Lereah is destined to become as much a laughingstock as the Dow 36,000 authors. I’m looking forward to it.
Also, I wonder if we will soon start to see “full disclosure” statements about realtors and realtor flacks, much like what the press does now with stockbrokers when they notify readers that “so and so owns XYZ stock.”
Lereah is a sociopath.
Wonder if he is related to Eazy Al.
More like Baghdad Bob. ‘Do not pay attention to the tanks in the distance. We will utterly destroy these American dogs.’
The Dave and Bob Show, coming to an AM station near you.
What ever happened to his ’soft landing?’
blame everything except inflated prices.
“Lereah predicted that price increases for existing homes in South Florida will fall to about 5 percent”…
‘Is this a bad year? Yes,’
My how we have lost perspective that ONLY 5% appreciation is a BAD YEAR.
PBC median price sits at $393K. The peak was $421K in 11/05. We have seen a 6.5% DECLINE in median price. This is a lagging indicator. I have read a bit of Mike Morgan’s views on Mike “Mish” Shedlock’s site and he says prices are DOWN about 10%. Mind you here in FL, our peak selling season is March-May. Our March numbers were awful and I can’t imagine that sales will be better in April or May. How we get 5% appreciation is beyond me. PBC will see about a 10% DECLINE this year with bigger declines in 2007 and 2008. The past 5 years have totally distorted the views of real estate appreciation. Many people are in for a rude awakening.
Yeah, where in economic theory do large sales volume decreases call for a 5% increase in prices?
Thanks CrazyintheOC, that was my point. ECON 101 says low demand + high supply = lower prices. I learned that in the first hour of the first day of my first Econ class. Why the RE industry can’t get it is beyond me. Maybe the RE exam prep class should remove “Shag Carpeting: Friend or Foe?” from the curriculum and add “Basic Economic Fundamentals for People with IQs under 50″?
LOL, nice one.
Thank you. I have shows at 8,10,and 12. Be sure to tip your waitress.
“My how we have lost perspective that ONLY 5% appreciation is a BAD YEAR.”
Lost perspective or the wrong perspective, I can’t tell which. The problem is the prevalence of the mentality whereby the purchase cost of the item is overlooked, and the focus is placed on the monthly payment amount. It is amazing to me that so many people delude themselves with the idea these shacks are ‘worth’ half a million dollars. If credit were banned how much would it be worth? It is as though people have joined in a strange conspiracy to enslave themselves to the lending institutions. The lenders surely must be chuckling at the stupidity of the masses.
It is as though people have joined in a strange conspiracy to enslave themselves to the lending institutions.
I believe it is a stunning lack of basic financial and math
skills amongst the general population.
Add to that problem our cultures addiction to instant
gratification and voila! It’s almost too easy for the
money lenders.
Heck, why go through all the trouble of adding trip wires to
the loan terms and conditions when the buyers themselves
are tripping all over themselves?
“It is as though people have joined in a strange conspiracy to enslave themselves to the lending institutions”
When I was young (I’m not that old, it was in the 70’s), we used to have to watch anti-communist propoganda films. during the cold war y’know.
I remember they had us watch this one film of Soviet propoganda vs. the west. In the film, it showed old Depression footage of people in food lines… and then it showed very unhappy people shuffling to and from work. The film said something like (paraphrased after about 30 years) “The capitolists force people to think they need things they really don’t. In this way the populace become slaves to things, and thus must work like slaves to pay for the unneeded items, and there is no way out. Although they think themselves free, the Americans are the biggest slaves on the planet!”
At the time the lights flicked on and we all laughed at the stupid Soviets.
I’m not really laughing that hard anymore. Some of that propoganda was pretty darn accurate. I say this as I look at my work schedule, and see that my work partner is picking up a lot of extra night and weekend shifts “to make ends meet”. Oh, and she makes a combined income with her husband around $300-400k/yr I’d guess… (she’s a doctor, he’s an orthodontist)
Clouseau.
capitAlists. Ugh.
clouseau
“The capitalists force people to think they need things they really don’t. In this way the populace become slaves to things, and thus must work like slaves to pay for the unneeded items, and there is no way out. Although they think themselves free, the Americans are the biggest slaves on the planet!”
Great quote Clouseau. I am not sure what is the root cause of the behavior but it seems to border on some sort of large scale obsessive compulsive behavior. Maybe we have lost our spirituality and are trying to replace it with material consumption.
Thank you for your post, Clouseau! I think many people are starting to wake up to this right now (and I’m a Libertarian Socialist, not a communist) :).
I think the problem lies with our obsession with “growth” instead of a stable economy. It seems to go along with the newness of our country. The established industrialized countries are more socialistic than capitalistic. They’ve been around a while and have wisdom we don’t. The U.S. is like a snot-nosed teenager — young, strong and terribly naive. We will learn, though.
What is with you people? Scuba man complains about the problems of his doctor friends that make 300-400 thousand a year. Their problem is that they can not say “no”. The next fellow bemoans cpitalism and says that American’s have the least freedom of any nation. How silly. Wake up. You sound like spoiled children. It is all about making choices. Under communism you are forced to work as you are told. You work out of fear. In capitalism the motivation is for a better life which can be pushed by greed. You can chose to be stupid or not.
We are in a time when houses operate under the “greater fool theory”. No amount of financial education will help. Only a historic knowledge and common sense. I prefer a system that allows me too chose even if the media is full of propoganda.
What is the economic problem? Overpopulation. It is gradually taking away the American dream. The radical nature of many nations is a function of population outstripping the benfits of technoloy. For example Gaza, Sadia Arabia and Iraq’s populations are three times greater than in 1950. How often do you hear about problems in Tunisia, another arab, moslem nation? In 1960 they established birth control and their nation has witnessed actual improvement in the people’s living standard. This is with little oil.
The reason Canadians, Austalians, Kiwi’s and until recently Americans had it so good is that their populations have been relatively stable in relationship with their area.
“Under communism you are forced to work as you are told. You work out of fear. In capitalism the motivation is for a better life which can be pushed by greed.”
_____________________
I’m not sure where you get that idea. In a purely capitalist system, people who don’t (or can’t) work will get sick, grow hungry and die. **THAT** is the greatest fear, and it’s the motivational force in a capitalist society — trying to survive, literally. With socialism/communism, you work for “the greater good” and the people are expected to help care for one another when the going gets rough.
With respect to overpopulation, I agree that this is a potential problem in certain areas, but not likely in the U.S. We have an awful lot of empty land and a surplus of many natural resources (primarily food).
BTW, Americans have been trained to follow the herd because, in a country as diverse as ours, we need to have common goals and beliefs — even if the govt relies on propaganda to create this unquestioning “patriotism.”
Imagine what this country would be like if we were taught to question authority. UGLY. In the meantime, those who are naturally inclined to use logical analysis and who question what they are told will be the winners in this winner-take-all (capitalist) socio-economic system of ours.
Part of the problem is the inherient inflation built into median pricing. The ratio of large homes to small homes being built now is always going to be skewing that number up, no matter what is happening to the price of individual houses. Maybe a 5% increase in the median price actually represents a decline in the value of individual houses
Right on. Not to mention the amount of remodelling taking place as homes pass from owner to owner.
A 5% appreciation in an up-to-100%-leveraged market provides great real returns if held long term. If held short term, commissions and other buying and selling costs wipe it out.
Link posted by NWFla in previous topic…
http://globaleconomicanalysis.blogspot.com/2006/04/new-gold-standard.html
Thoughts of Mike Morgan (quoted in Sun Sentinel article) about Lereah’s talk yesterday…
Very nice to hear some realism from an insider!
Kind of embarrassing to read, isn’t it? Lereah simply can’t admit what his economist heart is telling him. A fine case of someone who sold out long ago, and is coming to realize that soon now his credibility on these issues will be the butt of late night TV jokes.
I got a call from a very distressed Thornton Park in Orlando, about their inability to sell 1.2 Million dollar condos. Anybody in Orlando care to expand on where Thornton park is, and why oh, why would a condo cost 1.2 Million dollars in Orlando?????
If you draw a line straight east from the very center of Orlando, Thornton Park’s northern border is along that line, its southern border is about where Delaney Park begins (near Gore Ave.); its eastern border is around Mills Avenue and its western border is Lake Eola.
For years and years and years it was a sort of rundown area of small homes, many rentals, that now are well more than fifty years old. Its “resurrection” began when downtown Orlando itself started developing rapidly and a lot of office space was added — this drove the desire for housing within walking distance of the center of town. If the homeless/street people have abandoned Thornton Park, I’d think that is a recent occurrence. I would not feel particularly safe walking around in much of Thornton Park at night.
There are a few pretty flashy condo buildings in that general area of Orlando. Whether or not they would bring $1.2 mil depends, to me, on the square footage, exact location and amenities.
Very good indeed. No there are few if any places in Orlando where you can command that kind of money. Winter Park, maybe, but even that foolish money has dried up. Thornton Park is the new x generation hot spot. Many units on the market with flippers hangin on by their fingernails. 30 somethings up the wazzooo but they are all living on borrowed time and money. Hang on as it is gonna be a bumpy ride kids.
Did anyone else laugh out loud at this:
“Some question the economist’s alliance with the Realtors trade group and the fact that he wrote a book titled ‘Why the Real Estate Boom Will Not Bust”
Uh… yeah… some ‘question’ that little detail…
But wait! Isn’t he a respected economist — An academic? He couldn’t possibly let his personal gravy train influence his reputation as a respected nationally recognized economist, could he?
OT but, i just noticed inventory for fairfax county, VA jumped by over 200 homes overnight.. now we’re above 7000 homes.. about 7 times more than last year level
Although he remains positive about Florida, other areas, such as San Diego, could face sustained slowdowns because of flawed market fundamentals, he said.”
I wonder if David Learah will run down to San Diego and say no worries here folks, but those guys over in Florida I’m a bit more concerned about because of flawed market fundamentals.
David ‘Dike Man’ Lereah, running around the country plugging leaks and running out of fingers.
I live in a small town South of Boston, around 45 minutes by TRAIN from South station. If I took my car to South Station, commute could go to around 90 Minutes to 2 hours depending on traffic. Just saw a condo for sale 10 minutes from my house advertised as “metro” Boston. WTF, Providence could be “metro” Boston? Lyars, Damn Lyars and RE Agents!
“They’re telling us we’re in a bubble and that we’re going to come crashing down. There is nothing that could be further from the truth.” David Lereah
“We thought in fact the Wall Street Journal was on a witch hunt,” Kenneth Lay
“The state’s housing industry should pick up in the middle of 2007″
What is he basing this on? Wishful thinking, pure conjecture? Maybe just trying to keep the game going as long as possible which seems to be the theme here ever since Greenspan lowered rates to 1%. Sheesh!
Maybe that’s when his contract as NAR shill expires.
“Lereah blamed Wall Street analysts and the media for perpetuating negative hype regarding the housing slowdown.”
What do wall street analyst have to do with it. Its the housing companies reporting. The housing analysts just regurgitate this stuff. Ridiculous.
Simmsays..
http://www.americaninventorspot.com
test
could be that Liarrhea is right and that housing will only appreciate by 5% while inflation is 20% this year.
just look at what is happening in the markets: the dollar is getting hammered, gold is surging and Ben B, the FED and Wall Street couldn’t care less. They will solve every problem with their magic printing press and if that does not help, they will mop-up the damage afterwards at the cost of the taxpayer.
In this economic climate, I don’t think there is a remote chance of a real decline in home prices. And in Europe it is much of the same, inflation is raging (except in the official statistics) and home prices keep increasing despite a 500-1000% runup in the last 15 years.
Housing is dead but it could take years before the zombies realise it; this is what they call ‘Frankenmarket’.
This has long been my fear (and that of most people reading this blog). That, plus the likelihood of a massive S&L-style bailout for Fannie/Freddie. However, I suspect this approach may run into trouble for one big reason: wages would have to drastically inflate in close-to-equal measure, or broad-based inflation cannot take hold.
If the price of everything (other than RE) goes through the roof and wages stay stagnant, then consumption will fall off a cliff. People have already maxxed out their credit/home ATMs, so it’s not likely that they can borrow a whole lot more (100-year mortgages anyone?). This would throw the whole economy into a severe recession, which would bring prices back down into line with wages. I’ve seen very little evidence of any wage inflation over the past several years, and the BLA statistics even show small declines in most income segments in real terms. Add the fact that most new jobs created along the coasts have been related to the bubble, plus massive oursourcing, low wage immigration (global wage arbitrage) into the mix, and you don’t have the ingredients for robust future wage growth.
I think the Fed will try to inflate our way out of this mess, but it’ll be like pushing on a string, at least in the short run. OTH, if they can eventually trigger significant wage inflation, all bets are off. Of course if that’s the case, then eventually RE prices will still come back into line with incomes –it’ll just be mainly through stagnant house prices + wage inflation instead of nominal price cuts.
we don’t need no stinking wages, we have the housing ATM!!
And of course, same situation in Europe: wages have been increasing about 1% yoy over the last 10 years or so, with official inflation at 1.5-3% (and real inflation around 10%). It is safe to assume that average wages will fall in the next year due to competition from Polish workers etc. Only a small group at the top has received 10-30% yoy wage increases during the same period.
hallo from germany,
in germany the inflation during the past 5 years was around 1-1.5%. this numner includes oil and food. the inflation is just pciking up in the last 12 month.
the inflation in other lands like spain, ireland is indeed much much higher.
the metallunion just made a deal with companys with represent nearly 4.000.000 workers like mercedes, bmw, siemens etc that gives the workers nearly 3% payincrease.
P.S.: regarding the maxed out ATM, just look at recent history in Europe. No problem at all, Bernanke will lower the FED rate again soon, and with some extra fraud, leverage and taxpayer support (higher limits for subprime Fanny loans etc.) there is plenty of room for people to take on even more debt.
Of course the difficulty with attempting to inflate our way out of this bubble is that it really only workd with fixed rate debt. With revolving debt like credit cards, HELOCs ARMS, and short term Treasurys, It only washes away debts to the extant that inflation expectations are not already priced into interest rates. The effect is not proportional to the interest rates, but to their first derevitative; the rise in interest rates. Continued attempts tend to lead to hyperinflation. The only saving grace for the economy as a whole is the fact that we owe in dollars, so we can suffer a 50% currency correction without the dollar automaticly turing worthless like fraudnicks from Carjackistan. Long term though, I think that this has a good chance making dollars no longer the world’s reserve currency, kind of like the British pound 100 years ago.
Lereah:
> sales declines in many markets will continue at double-digit clips. The state’s housing industry should pick up in the middle of 2007
Bubble psychology: The realtors passed the denial phase, kept their anger for themselves and try to bargain now. Showing anger would be bad for realtor’s business; we can expect that from consumers instead.
Yep, there is a fair share of that at the OC Register RE blog.
And Jon Lansner edits out posts pointing out mindless lashing out on the part of RE bulls.
Both county or state-wide median and average prices are becoming meaningless.
There are always some super rich people who will continue to buy the most expensive homes no matter how much the rest of the population is in debt. When no one else but the super rich are buying, both median and average prices go through the roof.
Both prices and sales should be subcategorized according to location and size.
the only reliable index would be one that tracks individual home prices, maybe with some correction for significant upgrades (not talking about the granite countertops etc.).
In my area, the average home price is officially up +/- 350% over the last 15 years, while prices of individual homes are up 600-1000% over the same time period. Upgrades are hardly significant here, homes without any improvement have appreciated just the same.
This is all in a climbing market, I think it would work in reverse with a decline (so the average would probably underestimate the decline in individual homes).
“Both prices and sales should be subcategorized according to location and size.”
Or better yet, they should be broken down into price, say, in $100k incriments, as well as location. For example, sales for homes $400k - $499k for the month of April in Riverside County, CA. That would probably be too much work and way too incriminating. Just a thought.
Angela
“flawed fundamentals”
David L. is a nut
“He said it’s so slow that builders are paying buyers’ mortgages for six months and giving agents double commissions”
Incentives which, of course, don’t get reflected in median prices…
but maybe government can include these bonuses in their statistics, so that next month wages are really improving
LIE-rah
why don’t they sht can this guy ?
“I’ll still have my job” D LIE-rah
OT…I had to bring in the Orlando Sentinel with a wheel barrow because it had the weekend real estate preview…It must have been 50 pages….
I trained my dog to pick it up, but this morning she just looked at me with those sad puppy dog eyes…
Never met a one handed economist. They can always squirm out of worng predictions by saying, “on the other hand….” As in.. ‘ if we have another hurricane all bets are off.”
Captain Lereah:
“did the ship hit an ice berg, yeah. will it sink, no.”