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More Optimistic Fluff And Spin on Pessimistic Macro Numbers – This Type Of Reporting Simply Drives The More Intelligent, Valuable Eyeballs To Alternative Media, Ex. Blogs
The newest home sale numbers are in. I was going to quote the various MSM news outlets, but ZeroHedge’s Tyler Durden did such a superb job of congealing the essence of the various reports, I’ll just quote him:
Stocks are up which means another
fundamental data indicator must have missed expectations (following the
earlier GDP miss). Sure enough, the NAR just reported November
existing home sales, which came at 4.68 million units, a slight
improvement to the almost all time lowest number posted in October
(4.43 million), a miss to expectations of 4.75 million, and 27.9% off
the cyclical peak of 6.49 million from November 2009, when the
first-time buyer tax credit expired, and was shockingly not extended.
The data follows this morning atrocious MBA numbers which showed a
plunge of 18.6% in mortgage applications, and 24.6% drop in
refinancings. But if you listen to Goldman, the recent surge in mortgage
rates is actually beneficial for everyone involved and buy the
f#&$ing dips! Sure enough, the ever cheerful Larry Yun had this to
say: “Continuing gains in home sales are encouraging, and the positive
impact of steady job creation will more than trump some negative impact
from a modest rise in mortgage interest rates, which remain
historically favorable.” Um, continuing gains from all time record low
levels? Also, the part-time job creation which is the only thing that
is being created on steady basis is sure to be the ground for a fertile
surge in home prices. And with that the sarcasm is off.
What is actually entertaining is to here quotes from NAR chief
economists in the mainstream media (MSM). At what point do these guys
lose credibility? The mere quoting of some such as the NAR’s Yun, or to
a greater extent, his predecessor, is enough to permanently lose some
valuable (as in more intelligent, higher paid) eyeballs to alternative
media. To wit, as excerpted from Pay Attention to the National Association of Realtors and Their Chief Marketing Agent At Your Own Risk!:
On the topic of the National Association
of Realtors, and their marketing gurus chief economists, I assert that
BoomBustBlog’s regular constituency is much too bright to fall for the
pumping of real estate by the economist of a national realtor
association. For those that may be a little more trusting, or a little
less mathematically inclined, I will walk through previous
proclamations that have come from the NAR and their chief marketing
strategists economists…
July 2008 Yun stated “I think we are very near to the end of the housing downturn,” Yun said (AP News).
Lawrence Yun, chief economist for the
Realtors, said that the housing rescue bill should play a major role
in helping the housing market to rebound. He said an especially
significant feature is a tax break worth up to $7,500 for first-time
home buyers who purchase between April 9 of this year and July 1, 2009.
Yun estimated that up to 3 million first-time home buyers could
qualify for that tax break, providing a significant boost to sales at a
critical time. “I think we are very near to the end of the housing downturn,” Yun said.
As a point of reference..
Of course, I can go on…
In 2007 Lawrence Yun state there would be no recession in 2008, according to USA Today.
Of course, in that year I took the opposite side of that trade and
said very bad things were coming. As it turned out I was a tad bit
optimistic: Correction, and further thoughts on the topic, How Far Will US Home Prices Drop?, and Is this the Breaking of the Bear?
(Yeah, the Bear Stearns and Lehman Brother’s collapse were an easy
calls if you read the balance sheets and were realistic about leverage
and the real estate situation). This was also about the time I got into
it with GGP’s CFO for calling out their insolvency. He called me
names, and then they filed for bankruptcy. Of course, they had an
investment grade and buy ratings from the ratings agencies and the sell
side: BoomBustBlog.com’s answer to GGP’s latest press release and Another GGP update coming… (among over 700 pages of analysis, review the January 2008 archives or search for “GGP” for more research).
In my post “On the Latest Housing Numbers” of Tuesday, November 24th, 2009, I quipped.
Lawrence Yun, NAR’s chief economist volunteered,
“We have seen some bulk purchases by investors, but
we are not picking up that data through the Multiple Listing Service or
through our release data, but we do know that there is some bulk
purchases by investors who plan on releasing those properties within a
year’s time, when they see a better market condition.”
I don’t believe “better” market
conditions are coming any time soon. We are just coming off of the best
market conditions anyone will see in their lifetime. Those market
conditions were predicated upon unsustainable conditions, hence they
came crashing down. They are crashing down, not crashed – as in past
tense. I believe we have some ways to go. That is why I am not buying
real estate, and I believe that those that are jumping in now are
jumping in prematurely.
Personally, I don’t consider Mr. Yun to
be a credible source, either. He may be smart and capable, but the
extreme bias of his employer (the ultimate real property perma-bull)
and the incredibly biased reports of his predecessor color his opinions
by default. He is not nearly as bad as David Lereah (who was
literally sensationalist-style perma-bullish) was, but he is still not
objective. See The Reggie Middleton Real Estate IQ Test – Who believes the NAR?
This is an excerpt from that post on Tuesday, 08 January 2008
From CNBC.com: Home Sales Seen Holding Steady In Coming Months
Pending sales of existing U.S. homes inched lower in November and should hold
steady over the next few months, a real estate trade group said. (I
ask, “Why should they do that? Credit is tighter, recession evidence
is stronger. Supply is greater, and demand is lower. Hmmm, let me
consult the book written by that ex-NAR guru for the answer.” )The National Association of Realtors Pending Home Sales Index,
based on contracts signed in November, dropped 2.6% in November, to
87.6 from an upwardly revised 89.9 in October.Economists polled by Reuters ahead of the report were expecting
pending home sales to decline by 0.5 percent from October’s
originally reported 87.2.The November number was down 20% from a year earlier.
The pending homes sales data suggests that the volume of sales
will hold steady for a while before turning upwards before the end of
the year, said NAR chief economist Lawrence Yun.
With all due respect to Mr. Yun, Mr.
Lereah and the NAR, anyone swift enough to complete the registration
form for this blog should know, by now, to discount this association’s
data and opinions. They do not do the industry justice with this
nonsense. Realtors should actually be the first in the protest line.
It is their credibility that is being called into question, for this
is THEIR trade group. Credibility is the key!
Notice how accurate that NAR prediction was for 2008! From my blog post that day in 2008:
My take: I believe that my blog’s
readers are considerably above average in financial acumen and common
sense. The NAR is simply not an entity to be taken too seriously, due
to the obvious conflict of interest exemplified by their
ex-economist, [[David Lereah]], who published some of the most absurd
BS I have ever seen come from a nationally reknown organization.
Examples of his work from Wikipedia: Are You Missing the
Real Estate Boom?: Why Home Values and Other Real Estate Investments
Will Climb Through The End of The Decade, And How to Profit From Them
was published in February 2005 at just about the tippy top of the
bubble (that takes some talent). One year later in February 2006, as the
market is already on it’s way down, Lereah retitled his book Why the Real Estate Boom Will Not Bust and How You Can Profit from It. Lereah’s previous book The Rules for Growing Rich: Making Money in the New Information Economy touting investment in technology company equities was published in June 2000 at the onset of the collapse of the dot-com bubble.
This extreme cheerleading has died down substantially, but the
overly optimistic spin is still evident with their new economist,
Lawrence Yun.
I actually believe the Case Shiller graph
above to be misleadingly optimistic due to my doubts about
seasonality filtering and the exclusion of investor related properties
(flips, see A reminder concerning popular housing indices) which are dominating the lower end of the market.
So on that note, I will present a graph
that captures national economic house sales activity superimposed
against the Case Shiller index, but before I do that let’s laugh at
the NAR’s ex-chief marketing strategist economist…
Publications from Wikipedia
Lereah’s book The Rules for Growing Rich: Making Money in the New Information Economy[5] touting investment in technology company equities was published in June 2000 at the onset of the collapse of the dot-com bubble.
Lereah has produced four titles on real
estate investing. His most recent book, “All Real Estate is Local” was
published by Doubleday in 2007. His 2005 book Are You Missing the
Real Estate Boom?: Why Home Values and Other Real Estate Investments
Will Climb Through The End of The Decade—And How to Profit From Them[6] was rereleased in February 2006 as Why the Real Estate Boom Will Not Bust—And How You Can Profit from It.[7] Before departing the NAR, Lereah wrote All Real Estate Is Local: What You Need to Know to Profit in Real Estate — in a Buyer’s and a Seller’s Market in 2007.[8]
|
|
Lereah’s book on investing in information technology appeared in June 2000 as the dot-com bubble collapsed.[5] |
Now, let’s put this all together to see
what we get (reference each date above to the chart below.
Unfortunately, I did not chart the dot.com bubble crash, which Mr.
Lereah so accurately timed to the contrarian side 
(literally, almost to the month), so we will have to leave that one out…
Subscribers have access to all of the
data and analysis used to create these charts, in addition to a more
granular application, by state in the SCAP template and by region
in housing price and charge off templates – see
House price data, 2nd Quarter 2010- Bank Charge-offs and Recoveries 2Q10
- The
very extensive SCAP Assumptions, showing the credit metrics banks
needed to submit for the stress tests of 2009, Updated for last
quarter on a state by state basis_09082010 Web
Click here to subscribe
And now for the myriad, and may I add, requisite, “I told you so’s”. Subscribers can feel free to click the various download links to review the relevant models, reports and analysis:
The
3rd Quarter in Review, and More Importantly How the Shadow Inventory
System in the US is Disguising the Equivalent of a Dozen Ambac
Bankruptcies! Wednesday, November 10th, 2010: All paying subscribers can download the full shadow inventory report here: 
Foreclosures & Shadow Inventory. Professional and Institutional subscribers should also download the accompanying data and analysis sheet in Excel – Shadow Inventory.
Banks,
Monolines, and Ratings Agencies As The Three Card Monte (Wall)Street
Hustlers! Its a Sucker’s Bet, Who’s Going to Fall for it in QE2? Tuesday, November 9th, 2010
The Truth Goes Viral, Pt 1: Housing Prices, Economic Sales and the State of Depression Tuesday, October 5th, 2010
Subscribers have access to all of the
data and analysis used to create these charts, in addition to a
more granular application, by state in the SCAP template and by
region in housing price and charge off templates – see
- House price data, 2nd Quarter 2010
- Bank Charge-offs and Recoveries 2Q10
- The
very extensive SCAP Assumptions, showing the credit metrics banks
needed to submit for the stress tests of 2009, Updated for last
quarter on a state by state basis_09082010 Web
Reggie Middleton on Financial Survival Radio: Important Little Details Left Out of the Case-Shiller Home Price Index Saturday, October 30th, 2010
Click here for an interview I did with Financial Survival Radio…
Financial Survival Podcast – Reggie Middleton Reveals the Nasty Little Detail Left Out of the Case-Shiller Home Price Index
Related links:
The Truth Goes Viral, Pt 1: Housing Prices, Economic Sales and the State of Depression
- advertisements -
Yesterday Mr. Yun said he expects 2 million jobs to be created in 2011. What! Where is he going to get them from? This came out yesterday.
http://maysreport.com/2010/12/30/pending-home-sales-rise-in-november-but-lets-not-get-ahead-of-ourselves/
Great, I'll await books with titles like "Grow rich on bond market", "Make a killing in commodities" and "Ride upcoming US Dollar strength to financial freedom" from David Lereah to time the market.
I'm sure availability of these will be promptly posted on his fan site -- http://davidlereahwatch.blogspot.com/
My favorite as always are the non-seasonally adjusted figures (a.k.a. reality):
One of these days, I am approaching our local bank and see if they have a seasonally adjusted checking account...
Have sooo enjoyed reading all Reggie's analysis over the past several months. My big Question is.,Which US bank will be allowed to survive the Morgage debacle and the (nine month ago , much flagged commercial real estate 2011/2012 refi) Citi,BOA, JPM? Someone has to go down? The overhang is getting worse not better and we are now almost five years into the crisis.
(d)
x
Good working definition of Fascism:
Fascism is the form that the capitalist state assumes when the ruling oligarchy feels that its economic and political power is seriously threatened by working class revolution.
nearly anyone working in RE/mortgage is either stupid and naive or habitual liars. They have no idea but look for the best way to get you to buy NOW. No matter the conditions.
Any stupid hack can get into the RE biz.
But as a group I gotta give the NAR/RE professionals golf clap for brainwashing people into paying 6-7% for "expert RE" service for so long. Anyone who pays those type of commissions deserve to get fleeced! What a freakin joke! The NAR has done as good a job as the various Kosher food certification scam payoff schemes.
There is a local RE talk show. Their answer to ANY RE question hire a RE professional, preferably out of their own office. It's such an obvious scam but people are too stupid to at least negotiate fees.
and a charming sell it was. The homeowner takes equity out of his house, the equity was essentially locked for the duration (30yr or so). Depending on how much equity he draws, he may only be taking his profits, the long term gains in his investment, but even if he does take principle what's the harm, actually the harm is leaving that equity where it's growth rate is somewhat less than paper assets. The stock market goes up 8%YOY?. It makes a lot of sense. The second line has to do with reinvesting this money in your home, which functions much like a business. Add a few rooms a pool, your business is worth more. Thirdly there is no downside, as the equity was never available in the first place, its like having your own Central Bank to print your own money, all things remaining equal, the cost of the mortgage, the income of the borrower, so even if you did foolishly sqnader your nest egg, its really no different than a reverse mortgage, at the end of the day you have SSN and Medicare, and you are old, you probably don't care about spending lots of money anyway. It was a great sell, but who knew it would all blow up?
Reggie, what would happen when aapl IPHONE comes to Verizon and the new version is released in June, and new IPADS are unveiled, and growth on appl tv finally goes parabolic from "new stuff" to "widely accepted new TV platform"? Not so sure about your call; at least for the next three to five years. Besides, give anyone the ability to choose between an Android or IPHONE, and most likely the IPHONE will be preferred. Keep counting on GOOGLE ADs to push prices down and you will lose big.
hawk you say "give anyone the ability to choose between an Android or IPHONE, and most likely the IPHONE will be preferred. "
Really?
I'm sure most people in late 80s would have preferred Macs over IBM PC clone with DOS, but guess who won and who lost. Apple lost big time, but much later recover. And that is not even a fair comparison, because Android is in many ways preferable to Iphone software, and at least, equal to Iphone by being better in some ways and worse than in other ways. And Google is showing to ability and will to keep innovating Android at much faster pace than Apple is.
Have you used an Android phone? I live in a household with an Iphone, an Android Moto Backflip that is still on Android 1.3, and also have an Ipad, in several ways I prefer my Moto backflip to the Iphone, from a hardware and software perspective...I can't imagine how nice the latest Android phones with 2. are.
Just as IBM PC clones did, Android will have many hardware choices, like the fact right now Android has phones that are touch screen, or touch screen with physical key board (Droid etc), one of the reason I prefer Moto backflip to Iphone, I get a touch screen, a physical keyboard, and a back of scren track pad (like a lap top pad, makes moving from link to link on websites etc easy on a small phone screen, I miss it every time I use Iphone) and I can use the hinged key board as way to stand up my phone display on a hotel nightstand to see clock, incoming calls etc instead of leaning phone on various piles of things.
Just as IBM clones had many hardware choices and brought down the margins on hardware, so it will go with vast variety of hardware that will be available for Android. Apple will not have so many choices and will have to squeeze margins if they want to compete.
For awhile it may be that whole industry is expanding enough that many can profit. But margins will be squeezed and by this time next year there will be many inexpensive, high-quality Android alternatives to Ipad. Already there are different sizes, price points for Ipad alternatives in Android, this will only increase, meanwhile Ipad will only have one size, one style.
Google can out innovate Apple on software front, Android can provide as many good Apps as Apple, Android device makers can out innovate Apple, and have benefit of many carriers and many hardware choices.
Apple closed system with high margins will once again fall to another sofware standard with many hardware providers. Google will win and win bigger, as even today, Apple Macs are better in many ways to Windows, but Android phones software will be better, not worse, than Iphones.
http://www.irvinehousingblog.com/wp-content/uploads/2008/01/david-lereah...
(d)
when is Lereah putting out a book on buying gold/silver???
love your work reg. lately, some folks who voted me tin foil hat of the year 2 years running have been asking me for my opinion on all things ZH. they are using the sight and its links so lets hope enough people figure out the scams out before we go off the air.
Happy and Peaceful Christmas to you and yours reg, and a prosperous new year.
Reggie,
I'm shocked, absolutely shocked that you would suggest that Yun and his predecessor, Lereah, were pimps for the NAR. Imagine reputable economists selling their opinions to please their bosses. Why if they did that they would cast doubt on the entire economics profession.
Great. Put up a 5 day chart of the IYR and try to explain it.
Nothing matters as long the perception has to be positive and optimistic. If the market (housing or equities) won't go up then just force it up. Large peg, small hole, enormous sledge hammer....pretty simple.
Not only is real estate still falling, but even when it hits bottom THERE WILL BE NO NEED TO RUSH. Bottoming will be a multiyear process, not a single dot at the bottom of a V.
In the meantime, we have to let multiple (bearish for real estate) things play out:
- normalization of interest rates
- a return to real credit standards (25% down, 20-year loan, FICO > 750)
- end of subsidies to real estate
- clearing all of the shadow inventory
- resolution of the municipal debt crisis and possible attempt to jack up real estate taxes
- millions of layoffs coming to gov't employees at all levels except federal
- a crisis in the euro, and attendant much higher USD
I don't think anyone on ZH would argue most of these points (except higher USD), and all of them are bearish for real estate.
You forgot a couple of other factors that support your bearish case. First, the demographic shift in the country with aging boomers moving out of single family homes into assisted living/retirement facilities. Second is the potential threat of eliminating the real estate interest deduction for personal taxes. They dabbled in this and passed on it this time around but by 2013 when the nation's debt is $17+ trillion (current of $14 trillion plus two years of $1.5 trillion each), it will be back on the table. Right now you either need to be out in two (2 years) or your in for twenty.
As for the USD increasing, this is only correct when evaluated against other fiat currencies with worse problems than the US (the Euro and Yen). Against real economies and commodities, the USD should continue to devalue. But hey, there's always some short-term value to the best looking horse in the glue factory.
And in CA, Gov. Elect Jerry Brown is talking about revisiting prop. 13 which could mean huge property tax hikes for current owners and a big incentive to not become an owner here.
How's that call you made on AAPL doing, Reg??
What about the company's performance since the start of 2009 would cause you to value their stock at 365% of the January 2009 price?
Right on target my friend. Margins trending downward, market share trending downdward, impressions being lost to Google, competition spiking and getting worse, and the loyalist Apple followers ignoring each and every trend because accounting profits are going up and they make a lot of shiny things with pretty glass. All in all, one of the more accurate outlooks of the year.
Sorry you insist on seeing things your own way, Mr. Middleton.
http://www.huffingtonpost.com/jason-rosenbaum/breaking-fcc-breaks-obama_...
You can look forward to second-tier access to your "work" in the near future. Please be advised, however, that if your opinions become a threat to national security, we will be forced to kindly request that Comcast "drop" access to your work altogether. If this does occur, please note that the public's access to critical market commentary via Comcast/NBC's CNBC broadcasts will not be affected.
Hope and Change to You and Yours!
Barry Obama
I googled who owns CNBC/MSNBC. GE, the second largest coorporation in the world and the only company left on the DOW of the original 12 owns them. Then I googled who owns GE. Robert Michels' iron law of oligarchy is discovered here within this study. What we have divolved into is a plutarchy. The middle class is being consumed and is by and large too dumbed down by Lohanism and Bradjolinia to lift a finger in its defense. I googled Meredith Whitney and the very first hit on her is an editorial by Bloomberg bashing her predicition on the coming municipal tragedy. Who pays that kind of money to make sure that is the first hit on her? Websites like Zero Hedge is where the real news can be found. We'll see what happens to us when the internet regulations are put in place.
I suspect a whole slew of unintended consequences, most of which the wielders of the heavy hand will find to be appreciably less than conducive to the furtherance of their goals.
"The danger to the United States is not communism but a fascist theocracy"
Looking at that Case Shiller chart, it seems there is about a 1 year timeframe, from where the trouble sets off the collapse. So yes, by the time the collapse began it was too late. Plan accordingly. In the next 6-8 months, another collapse according to the data.
Right, prices tend to be sticky, because typically you're not going to drop the price lower than it would cost to pay off the loan + any associated costs of selling. That's why it's important not to go on price data alone, but to also look at units sold.
Units are also important when looking at homebuilders.
http://manifestdeconstruction.blogspot.com/2010/12/on-housing-permits-starts-and.html
Permits data is another solid indicator of where the housing industry is at in terms of what I refer to as "economic opportunities", ie., the builders normally request permits if they feel they have a pretty good shot at getting sales value out of the property they purchased. As builders are typically fairly optimistic, it's particularly telling that permits are still in the basement.
The folks in my life politely listen to me - but I can see the look in their eyes when I tell them what I've learned from ZH. Most people just don't care and/or don't want to know - period. From here, they only care about up or down so until the fundamentals begin to matter (cause/effect of all fed's bullshit), the audience interested in these topics will largely remain the same, unfortunately. Which just really sucks, cause its important.
Maybe it is because you repeat yourself?
Madoff 'em
Beating up on an industry shill is not good sport, but I like it nonetheless.
Thanks, Reggie.
The folks in my life politely listen to me - but I can see the look in their eyes when I tell them what I've learned from ZH. Most people just don't care and/or don't want to know - period. From here, they only care about up or down so until the fundamentals begin to matter (cause/effect of all fed's bullshit), the audience interested in these topics will largely remain the same, unfortunately. Which just really sucks, cause its important.
The folks in my life politely listen to me - but I can see the look in their eyes when I tell them what I've learned from ZH. Most people just don't care and/or don't want to know - period. From here, they only care about up or down so until the fundamentals begin to matter (cause/effect of all fed's bullshit), the audience interested in these topics will largely remain the same, unfortunately. Which just really sucks, cause its important.
Given David Lereah's forecasting record, you could be looking at our next Fed chairman.........
I knew Lereah when he was the economist for Nations Bank. Full as shit as a Christmas turkey.
Ask any Real Estate Professional anywhere, anytime in history the question:
"When is a good time to buy a house, Mr. Realtor?"
and the answer will be... "NOW!"
And with that we can see the full granularity of their expert, completely unbiased analysis...