Tuesday, 11 December 2007

NAR Chuckleheads at it again

Yesterday in the US, the National Association of Realtors (NAR) released pending home sales data along with some totally unrealistic forecasts for next year. From the NAR:

Existing-Home Sales to Trend Up in 2008

Lawrence Yun, NAR chief economist, said the worst part of the credit crunch has already worked its way through the data. “The unusual mortgage disruptions that peaked in August were clearly seen in lower home sales that were finalized in September and October, so the market was underperforming,” he said. “Now that mortgage conditions have improved, some postponed activity should turn up in existing-home sales over the next couple of months, and I expect sales at fairly stable to slightly higher levels.”

Unfortunately for Yun, the worst part of the credit crunch is yet to come. The statement is all the more ludicrous when you consider Alt-A and ARM resets have not even peaked yet.

The Pending Home Sales Index,* a forward-looking indicator based on contracts signed in October, increased 0.6 percent to an index of 87.2 from an upwardly revised reading of 86.7 in September. It was the second consecutive monthly gain, but remained 18.4 percent below the October 2006 index of 106.8. “The broad trend over the coming year will be a gradual rise in existing-home sales, but because sales are exceptionally low in the final months of 2007, total sales for 2008 will be only modestly higher than 2007,” Yun said.

Existing-home sales are likely to total 5.67 million this year, the fifth highest on record, rising to 5.70 million in 2008, in contrast with 6.48 million in 2006. Existing-home prices should be down 1.9 percent to a median of $217,600 for all of 2007, and then rise 0.3 percent to $218,300 in 2008.

Chief cheerleader Lawrence Yun put beyond any shadow of a doubt that he has any credibility as a forecaster. Remember this is the same muppet who downgraded his forecast for pending home sales 9 times this year.

Remember back in September Goldman Sachs came out with a forecast of 4.9 million for existing home sales in 2008 and since then they have become appreciably more bearish. As usual Calcualted risk has some great articles on why the NAR is being way too optimistic. Below is an excerpt.

At the bottom of a housing cycle, sales typically fall to 5% or even 4% of owner occupied units (a measure of turnover). There are currently just over 75 million owner occupied units in the U.S., so 6% (the median for the last 40 years) would be sales of about 4.5 million in 2008, 5% would be sales of 3.75 million, and 4% would be 3.0 million units. This isn't a forecast - just a review of historical data - but it is possible that sales could fall sharply from the current levels.

Click on the two links above for two separate articles from Calculated Risk.