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May 12th, 2011 (Modified on May 13th, 2011)

I knew where the market was headed in 2006 and now in 2011

by Peter Miller


2011-3DReal estate has always been distinguished by happy people, folks who can find joy in every market situation.

Consider the case of David Lereah, former chief economist with the National Association of Realtors and author of the 2006 book “Why the Real Estate Boom Will Not Bust – And How You Can Profit from It: How to Build Wealth in Today’s Expanding Real Estate Market.”

In 2006, many economists and soothsayers agreed with Lereah. Indeed, his book produced fabulous reviews according to Amazon:

“An invaluable book . . . Today’s real estate markets are booming and Lereah makes a convincing case for why the real estate expansion will continue into the next decade. This book should prove to be a truly practical guide for any household looking to create wealth in real estate.” —DEWEY DAANE, FORMER GOVERNOR OF THE FEDERAL RESERVE BOARD OF GOVERNORS

“An important book, whether you agree with the author (as I do) that housing will remain an excellent investment or are convinced that home prices are poised for a plunge, David Lereah lays out a compelling vision of housing as a continuing positive investment—and how you can profit from real estate if you already own the home you live in, are looking to move from rental housing to an owner-occupied home, or want to use real estate as an investment.” —DAVID BERSON, CHIEF ECONOMIST, FANNIE MAE

My view at the time was a little different

At their annual convention in 2006, I told the Association of Real Estate License Law Officials (ARELLO) that “A growing number of recent property owners will find that they have homes and investments which cannot be sold at a profit–as well as homes and investments which cost too much to carry. The fruits of this impossible dilemma will be more properties for sale, more supply, more pressure to moderate if not lower prices, more foreclosures, and more bankruptcies. Even those without a mortgage may find that the value of their home will drop as neighbors who financed imprudently rush to dump their properties on the market.”

The year 2006, of course, was the last gasp of a home market powered by toxic loans and no-doc mortgage applications, a market that was certain to fail.

I bring up the past as a way of pointing to the present

According to a Tuesday news release from the NAR:

Existing-home sales continued to recover in the first quarter with gains recorded in 49 states and the District of Columbia, while 22 percent of the available metropolitan areas saw prices rise from a year ago, according to the latest survey by the National Association of Realtors.

Total state existing-home sales, including single-family and condo, rose 8.3 percent to a seasonally adjusted annual rate1 of 5.14 million in the first quarter from 4.75 million in the fourth quarter, and are only 0.8 percent below a 5.18 million pace during the same period in 2010.

Translation: roughly 78 percent of available metro areas saw home values drop and sales have slowed by 0.8 percent.

I received another news release on Tuesday, this one from Integrated Asset Services, a firm which follows real estate prices across the country:

“We look at the housing market all the way down to the neighborhood,” said Paul Sveen, IAS chief executive officer, “and there’s just nothing good to see in this report. I have very real concerns the U.S. housing market is on its way to a new low.”

“There are simply too many market factors weighing against house prices to correct the supply and demand gap in the near term,” Sveen added. “Even if the economy is normalizing a bit, I just don’t see any of the problems overhanging the housing market going away any time soon.”

Only time will tell if Mr. Sveen is right or wrong…but I agree with him.

Peter G. Miller is syndicated to more than 100 newspapers and operates the real estate news site, OurBroker.com.

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