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Edict From New Orleans: Keep The Housing Market Above Water

The National Association of Realtors held their annual convention in New Orleans [1] this year and with that came a series of press releases, most notable was their housing forecast about future prices and sales volume [CNN/Money] [2].

NAR attributes the positive forecast due to low mortgage rates, stable employment, low inflation and more competitive (lower) pricing by sellers. This contradicts the projections of most analysts, which are not as optimistic, suggesting that its going to take three years to absorb the excess inventory [MW] [3]. Building permits, for example, are down more than 20% [JB] [4].

I am not sure how their chief economist David Lereah forecasts these trends but they don’t make sense, or at least when using the reasons he provides. NAR actually forecasts slightly higher mortgage rates and rising inventory next year. What is thje catalyst that reverses the currenbt trends. In other words, what will change to cause these forecasts to occur?

I understand these are national numbers and local markets will behave relatively independent of each other, but thats not what is being presented here. Its a rehash of the theme brought up in the NAR recent ad campaign [SFGate] [5].

According to [a recent Gallup poll, homeowners are still optimistic about the value of their home Free access on 11/13/06 only – main details below [6].

I suppose if you keep saying something long enough, it becomes reality. After all, value is influenced by perception. Public relations 101. For all the criticism of NAR and its distortion of certain housing realities, its efforts have largely proved to be effective. Whether or not this is a good stimulus for the housing market is another matter.