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NAR flip-flops on cuts, asks for bigger taxpayer bailout instead



April 22, 2008 – Comments (5)

It's the monthly pig lipsticking for the National Association of Realtors, and there's no way to make this look good.

Where to begin? Existing home sales continue to plummet, nearly 20% below last year. Prices now show a crash of 7.7%, which the NAR wants to blame on mix, though Case-Shiller information shows this to be on the happy side of reality.

Craziest is this, from Lawrence Yun, who inherited David Lereah's position as minister of bad information for the NAR. Check it out: Yun offered a caution.  “With elevated inflation, the Federal Reserve should be extra careful about further rate cuts,” he said.  “Mortgage interest rates, which do not move directly with Fed funds rates, may rise measurably and hurt the housing recovery if inflation gets out of hand...

Interesting. Even the 6-percenters at the NAR seem to realize that they've got a tiger by the tail, and are officially flip-flopping on their months worth of begging the Fed to keep rates at inflation-baiting levels.

Here's what Yun said in December, 2007:  Lawrence Yun, NAR chief economist, said the market is experiencing uncharacteristic weakness.  “Home sales remain weak despite improved affordability conditions in many parts of the country, but we could get a quick boost to the market if loan limits are raised in combination with the bold cut in the Fed funds rate,” he said.

And here's what this industry mouthpiece said in January, 2008:  NAR also encourages the Fed to make a single lump-sum cut in the Fed funds rate to 3.5 percent at the January Federal Open Market Committee meeting, rather than a series of modest cuts throughout the year.  “Consumers are also looking to market-time interest rates, and the expectations of further rate cuts are pushing some home buyers to delay.  Monetary policy will be much more effective with a one-time large cut, rather than a series of small cuts,” Yun added.

But don't get too excited. Yun has found religion far too late, and he's not really in the choir. Instead, he figures it's a lot easier to pressure congress (something the NAR has been doing for years, with shameful success) to figure out ways to pad Realtor incomes than to try and push Bernanke around -- and Ben's out of bullets anyway.

So, Yun is giving up on monetary policy, since that hasn't worked, and he's asking for another taxpayer-funded homedebtor tax giveaway to try and entice a new generation of real-estate bag-holders. See: what is needed more at this point is a home buyer tax credit to get buyers off the sidelines and prevent the market from overshooting on the downside.”

Of course, home buyers already get tax-givebacks a-plenty, and in fact, this idiotic policy bears some of the blame for the current problems. (Realtors and lenders have for years been telling potential buyers to relax when examining their finances... Several have tried to talk me into bad prices and bad loans by giving me the "you'll save a lot on your taxes." line.)

And as for "overshooting on the downside," this guy has obviously not looked at the facts. The market is still far too expensive by any measure (especially rent vs. mortgage) and it has a long way to fall before it even reaches the appropriate "downside." And as a note, neither Lereah nor Yun ever seem to have had much to say as the bubble was shooting prices way past the logical "upside." Why not? Because it wasn't in their personal financial interests to do so.

Note to Lawrence Yun: You are wrong. You have been wrong for months. Wrong about the facts and wrong about your ethics. You work for an organization that clearly puts its members' pocketbooks ahead of its customers. When most people are in a hole, they quit digging. Put down the shovel, Lawrence.

5 Comments – Post Your Own

#1) On April 22, 2008 at 11:04 AM, TMFBent (99.29) wrote:

Oh, and let's note a couple more things. Usually, sales rise no matter what as we roll into the spring selling season. If sales are dropping while the weather gets better, that's very bad.

Also note that the March, 4.93 million annualized pace of sales is far lower than the 5.39 million pace that the NAR predicted for 2008 back in April.

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#2) On April 22, 2008 at 12:05 PM, leohaas (29.98) wrote:

Bent, you are doing an excellent job of exposing the spin game going on at the NAR! Keep it up.

Strangely enough though, arguments can be made both ways when it comes to rate cuts. Rate cuts lead to LOWER rates short term, which is good for resetting ARMs (and even new ARMs if you can get one). However, they lead to HIGHER rates long term due to increased inflation, which is bad for new fixed-rate (refis or new loans) mortgages...

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#3) On April 22, 2008 at 12:09 PM, floridabuilder2 (98.23) wrote:

If the govt bails out homeowners or takes bad assets from more bear stearns type of companies, doesn't that increase the cost of borrowing for the govt?  I thought the mortgage rates closely followed the ten year treasury, so it seems like this would be another negative in addition to inflationary pressures.. on the ride to work abbey cohen and some other hacks were on saying now was a great time to buy...  the more they spoke the more the futures slid

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#4) On April 22, 2008 at 12:22 PM, TDRH (97.41) wrote:

10 month supply of existing homes are on the market at the current rate of sales.   This is occuring at or near what was once called in my econ class "the natural rate of unemployment 6%".    What happens as the economy slows and unemployment rises?   This will cause a further decline in median household income at the same time credit is tightening.  Loans in the future will hopefully require that the buyer has skin in the game.   Though a boom for the postal service, jingle mail is crippling for the economy.

The result will be a shift in the demand curve for housing- a correction for disparity between median household income of 48K and median home price of 200K.     At the same time we will see a shift in the demand curve for consumer goods which was caused by the wealth affect of the appreciation of home values- home equity lines of credit etc.   This will be further impacted by rising costs of goods, services and energy.

The rate decoupling which you graphed months ago shows the impotency of monetary policy.    Congress is by definition useless.   The market just needs to correct and it will. .  Pain and suffering is ahead if we are going to avoid stagflation and or fight our way out of it.   

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#5) On April 22, 2008 at 1:45 PM, abitare (30.02) wrote:

Here is a good Graphic for the NAR website:

In the Shadow of Foreclosures

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