NAR's Drops Latest Steaming Pile on Media
"Stable Existing-Home Sales Expected in Early 2008, then Gradual Rise..." Don't you believe it. These guys have been saying the same thing throughout the train wreck. Here's a year's worth of dorky NAR spin.
Date YoY Spin
1/4/2007 -11.4% Pending Home Sales Show Steady Trend
2/1/2007 -4.4% Pending Home Sales Index Rises
3/6/2007 -8.9% January Pending Homes Sales Down Due to Weather Fluctuations
4/3/2007 #DIV/0! Pending Home Sales Show Effects of Weather, Possible Subprime Impact
5/1/2007 -10.5% Pending Home Sales Indicate Near-Term Softness
6/1/2007 -10.2% Pending Home Sales Index Shows Market May Be Stabilizing
7/3/2007 -13.3% Pending Homes Sales Index Declines While Some Regions Are Up
8/1/2007 -8.5% June Pending Home Sales Index Shows Market Improvement
9/5/2007 #DIV/0! Pending Home Sales Index Falls Largely on Mortgage Tightening
10/1/2007 #DIV/0! Mortgage Problems to Dampen Home Sales in Short Term
11/13/2007 -20.4% Modest Recovery for Existing-Home Sales in 2008 as Credit Crunch Subsides
12/10/2007 -18.4% Existing-Home Sales to Trend Up in 2008
1/8/2008 -19.2% Stable Existing-Home Sales Expected in Early 2008, then Gradual Rise
Note there's absolutely no data whatsoever supporting their conclusion, in fact, the year over year changes are still awful. Yet they're calling a bottom!
Here, however, is where we see just how disconnected from reality this group is, and what lengths it will go to in order to get its 6%. Here, another plea for help from the Fed.
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 is either an idiot or a liar. Here, I present to you, a graph showing the relationship of Fed Funds rate and various other interest rates, plotted next to mortgage rates.
What you can plainly see is that the Fed Funds rate uncoupled from the mortgage rates back in early 2000-2001, and the financial alchemy and bad lending that began about that time is what provided the money supply for the RE bubble. As it got really low, mortgage rates didn't follow very far. Moreover, if you look at the right side, after the FF rate came back up, you'll notice the spread between it and mortgage rates was much thinner. This was the last hurrah for the housing bubble, when lenders were cutting each other's throats, getting paid too little for risk, and doing all those other, more toxic loans: Alt-As, stated, etc., that don't show up on this graph. Far right, we see that as the FF is getting cut, mortgage rates aren't falling as quickly. In other words, the spread is going back toward normal.
Conclusion? Fed Funds cuts will do little or nothing to improve home sales. Prices need to fall to the point where people can afford mortgages -- plain old-fashioned, conforming mortgages. It's that simple. If the NAR won't admit that, it's because they're too interested in lining their own pockets.