Just a flesh wound

From Peter Schiff via Goldseek:

Did He Really Say That?
By: Peter Schiff, Euro Pacific Capital, Inc.

Going from the sublime to the ridiculous, this week, in response to the first national year-over-year decline in housing prices since 1995, David Lereah, chief economist for the National Association of Realtors said “We’ve been anticipating a price correction and now it’s here. The price drop has stopped the bleeding for housing sales. We think the housing market has now hit bottom.”

First of all, when did Lereah ever predict a price decline? Isn’t he the same guy who constantly assured us that real estate prices would never fall? That all that would happen to prices is that they would rise more slowly.

Second, what makes him an economist? Is he really employed to give an honest assessment of the future prospects of the housing market and real estate prices? Lereah is no more an economist than Henry Blodget was an analyst. Despite their titles, both were hired to help salesmen move inventory. For Blodget it was internet stocks, and for Lereah it is houses. Realtors cannot convince as many people to over-pay for houses if their own economist forecasts prices to drop. Why this man still gets taken serious by the media is beyond me. Anything he says should either be printed in the classified section or as part of a legitimate display advertisement for realtors.

Finally, what the hell is he talking about? How can he say that the bleeding has stopped, when its barely just begun? It reminds me of the Monty Python skit where the Black Knight claims his severed limb is “just a flesh wound.” Does it seem feasible that the biggest real estate bubble in U.S. history would bottom out after a mere 1.7% price decline? What signs could he possibly see to confirm that the housing market has bottomed? Let’s see, national home prices fell for the first time in 11 years, with 2006 likely to be the first calendar year in 70 where that occurred. Inventories are at record levels and still rising, sales have fallen for five months in a row and are down 12.6% in the past year, foreclosures are surging, builders are offering additional incentives to sell houses, reporting higher cancellation rates, and repeatedly lowering their earnings estimates. Further, over-stretched homeowners are facing a wave of ARM resets beyond their abilities to pay, the economy is headed for a recession and everyone is still expecting a soft-landing. Yep, it sure looks like a bottom to me.

The reality for real estate is that the only visible signs are those confirming the formation of a major top. It’s more likely that Mr. Lereah saw Elvis than a bottom in the housing market. My guess is that we are a very long way from a bottom, and by the time its visible, Lereah will be out of a job.

This entry was posted in Housing Bubble, National Real Estate. Bookmark the permalink.

54 Responses to Just a flesh wound

  1. Pat says:

    I’d just like to be a fly on DL’s wall to hear what he says when he looks in the mirror.

    Do you think he’s working on his resume, or a tell-all book?

  2. Bruce says:

    Lereah is a liar and a schill for the housing industry, nothing more.

  3. ahs says:

    boy this guy Lereah is really delusional,.He is a fruitcake a nut job and has no right holding that type of job to lie to people. Real sicko this guy,

  4. BC Bob says:

    Schiff has been singing this tune for some time. He should debate Lereah. Great stuff!!

  5. vb4203 says:

    New worry: A hard ‘soft landing’
    Everyone agrees the economy is slowing but recent reports have some analysts concerned about recession.


  6. gary says:

    Yes, classic does say it all.

  7. Says says:

    David Lereah wants all of us to drink the kool aid.

    An interesting spin the industry is putting on it now i think: if housing falls, everything falls. This was the same sentiment back in the dot bomb era. Oh if we lose our shirts in the market then all hell will break lose and NOBODY will be able to buy. Its a cry of desperation if you ask me. A chance to take a swing at the taunting crowds.

  8. UnRealtor says:

    “Boy this guy Lereah is really delusional,.He is a fruitcake a nut job and has no right holding that type of job to lie to people.”

    Bear in mind everything he says has the implicit stamp of approval from the NAR. If they didn’t like what he was saying, he would be replaced.

    All part of the “realtor code of ethics.”

  9. James Bednar says:

    I’m not exactly sure when the point was where people forgot who the NAR constituency was, because it isn’t the American public.

    Their loyalty is to the real estate industry, namely their legions of Realtors ™, not to you or I.

    Once you realize this, everything that Lereah and the NAR say make perfect sense.


  10. Hard Place says:

    I’ve been negotiating on a deal after doing a lowball. Now the seller’s agent said they have another buyer willing to place an offer and requires us both to put in our best and final offer. Just a sales tactic? Not sure. Thoughts?

  11. Rich In NNJ says:

    Great stuff!

  12. InfoDiva says:

    Is this the same Peter Schiff who made MSN Money’s “Ten Worst Money Predictions of 2005” list?

    He has been singing the same tune for a long time, as BC Bob points out.

    But not to worry–even a broken clock is right twice a day.

    Schiff and Lereah are extremists, IMO. Don’t ever forget they both have something to sell.

  13. Pat says:

    Schiff definitely has the role to sell his wares, and understandable. Clear.

    Lereah, on the other hand, is given a quasi-public soapbox. I don’t see Schiff-alikes standing in front of Senate hearings.

    The responsibility that comes with a figurehead role outweighs the profit motive side of a position. I’m not trying to say that DL should be the next Buffett or Oprah incarnate, but I think DL’s just doing a piss-poor job of balancing the public and private good aspects.

  14. Michelle says:

    [i]I’ve been negotiating on a deal after doing a lowball. Now the seller’s agent said they have another buyer willing to place an offer and requires us both to put in our best and final offer. Just a sales tactic? Not sure. Thoughts?[/i]

    It could be…How much do you want the house? There are some better folks than me around here that I’m sure will give you some solid advice, but I would think your decision on how to play it depends on a few things:

    1. How much do you really want THIS house?
    2. What do you really think it’s worth?
    3. How long has the house been on the market?

    When we bought our house this year our agent (who was also the listing agent) told us that – miraculously – after the house had been on the market for over 6 months, there was suddenly someone willing to buy the house sight unseen for the asking price. This person showed up the day after our offer was accepted. She seemed to bring this up every time we were negotiating things in attorney review and then in inspections. Was it BS? Probably. I’m 99% sure of it. We were petrified of losing the house though as it is extremely unique and special. Come to think of it, I’d like to sue her for emotional distress.

    If you’re not totally dying for the house you’re looking at now, play tough with the agent. Tell them you’re not interested in getting into a bidding war in this market and act like you’re willing to just let it go. If you NEED this house then I suppose you should give your best and final – but don’t make this a cent over what you think is the right price to pay given the current RE trends.

    Good luck!

  15. Michelle says:

    Damn…that attempt at html didn’t work…

    Hey – can someone tell me if we can edit our posts and if so how? Thx!

  16. Seneca says:

    Hard Place – Add nothing more to your offer and call it a day unless you are obsessed with living in this house. It’s likely a sales tactic ( do we have ANY reason to trust agents at this point?) and for all you know, your price is already the higher of the two bids if another one really does exist. 1,000 new homes on the MLS over the past month… I bet there will be 1,000 more in the coming weeks and one will have your name on it.

    I have seen a number of homes posted on MLS on only slightly inflated asking prices (say 10% instead of 20-30% higher than what is justifiable) that appear to go into contract in a few weeks, and then magically appear again in a month. I am guessing its buyers realizing the market keeps sinking and they jumped in too soon.

  17. njresident286 says:

    Hard Place –

    Tell the RE agent to let the new buyer submitt the offer in writing and then see of the seller accepts. If they do, you lose the house. With the increase in inventory and lack of buyers right now, you are in a great position to find another house. I would not overpay for this house. You bid what you thought was acceptable, and I would not bow to any pressure from the seller or RE agent. if someone wants the house more than you, then let them take it. I would not be standing there with a higher mortgage payment just because I was to proud to let someone else outbid me

  18. skep-tic says:

    Hard Place–

    the seller’s realtor is in no position to be dictating how the negotiations will transpire.

    if there is truly another bidder, let him bid, but I do not see any reason why you should be forced to make a “best and final” bid at this stage.

    If the seller/realtor doesn’t like your wait and see approach, then they risk losing a legitimate buyer. Moreover, if they cause you to walk away, they completely lose their leverage over the other bidder (again, if he actually exists).

    with so much inventory available, they would be foolish to pressure you too much over the form bidding will take. let them know this and make them show you the counter bid before you do anything

  19. Lindsey says:

    I really like Peter Schiff and I really respect his analysis, but he is 100 percent wrong about Lereah’s fate. There is absolutely no price he ever has to pay for being wrong or even knowingly lying.

    Lereah is not out there talking to people who actually want to know anything, he is simply the assigned RE expert for the media.

    The reporters and editors who bring you Lereah don’t have a clue what he’s talking about and they don’t care. He is the official expert and whatever he says, they are going to report.

    It’s not because they are evil or stupid or even lazy, this is just the way they view their jobs. A rational person who is paying a little attention can see through Lereah in a heartbeat, but that’s not what mass media news organizations are trying to do.
    They have space or minutes to fill and he is the official voice of real estate, that’s all they need to know.

    Peter Schiff makes his money by calling bullshit on people like Lereah, but their are plenty of people who will deride him for sport, because sometimes he’s wrong too. The difference is that when he’s wrong it happened because he made a mistake, not because he was shilling.

    Finally, it’s only fair to acknowledge that the media also does call bullshit on Lereah and others who are out there selling, but they never do it to their face. Generally, you’re only going to see the “expert” contradicted if you going looking for it. They bring them out, they let them spew and then they smile and wave them off the stage so they can bring the next shill on.

  20. Pingback: Anonymous

Comments are closed.