If all news is good news (follow-up on grown-ups who smile to much) : Manhattan Loft Guy

Manhattan Loft Guy

Jun. 27, 2006 - If all news is good news (follow-up on grown-ups who smile to much)

A follow up to my post about NAR’s Chief Economist David Lereah being one of the ‘grown-ups’ who talks too ‘happy’ sometimes (rah-rah sis boom…too much happy talk….)

National price appreciation to be up 5.7% in 2006 and 4.2% in 2007?

Lereah in the July issue of REALTOR® Magazine projects home sale price appreciation for 2006 and 2007 as being 5.7% and 4.2%, with the numbers of homes sold in the country projected as 6.62 million and 6.7 million. Fair enough (to me), as he is the expert and has access to all sorts of data.

But then he says that

A soft landing with cooling sales and easing appreciation this year will help the market in two ways.

First, it’ll give household income a chance to gain ground lost to home prices.

Second, it will drive safety-conscious buyers back into more stable fixed-rate financing products.

I don’t get that, either first or second.

How can income keep up with that?

First, I don’t have the hard data but I doubt that real average household income will increase 5.7% in 2006 and 4.2% in 2007 (by “real average household income” I mean to exclude the impact on the average of the Gates, Buffett and other super-compensated households; seems to me I have seen reports that real wages are stagnant or falling … but I digress…). If household income increases by less than 5.7% in 2006 (and less than 4.2% in 2007), then household income will not “gain ground lost to home prices”; it will just lose ground less quickly.

I guess that is good news, but not the same good news that Lereah claims it to be. And certainly not as much good news.

What more motivation do safety conscious buyers need?

Second, I don’t see the connection that Lereah sees between slower home price appreciation and motivation of “safety-conscious buyers” to use “more stable fixed-rate financing products” rather than more exotic loans. Seems to me that “safety-conscious buyers” have enough motivation to go fixed-rate from the Fed’s continued campaign to raise interest rates. But maybe I am missing something….

This kind of spin on this kind of data (or projections) does not seem to me to be helpful. If all news is good news, credibility is bad.

If he keeps this up, Lereah’s credibility will be down 5.7% in 2006 and 4.2% in 2007. Or more.

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Jun. 29, 2006 - re: If all news is good news (follow-up on grown-ups who smile to much)

Posted by Bonnie Erickson

I'm with you on the "lose ground less quickly". Income for the average Joe is lucky if it keeps up with cost of living let alone the escalating housing costs the last few years. Soft landing . . . feels like a lot of road kill in Minnesota!

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