The National Association of Realtors (NAR) forecast for the 2013 housing market was an object of contention at the recent National Association of Real Estate Editors (NAREE) conference.
NAR predicted positive changes for the national housing market in 2013, including:
- 10% home price appreciation; and
- 70-80% growth in housing starts.
Under interrogation from NAREE participants, NAR later revised its home price appreciation estimate downwards to a 3-5% increase in home prices between 2012 and 2013.
Both the National Association of Home Builders (NAHB) and Zillow considered NAR’s predictions too optimistic and offered more conservative forecasts for the real estate market.
Zillow acknowledged home sales rates and prices vary significantly depending on the geographical location of the market. For 2013, Zillow predicted only a 0.9% increase in Los Angeles home sales and price.
first tuesday take
This isn’t the first time (or the last) NAR will attempt to force its rose-colored vision on the masses. It may be nice to bathe in the warm fantasy of an 80% increase in housing starts, but few others are able to suspend disbelief with quite the same skill and tenacity outside of a theater.
Yes, the housing market will eventually recover; sales and prices will increase. However, this will not occur at nearly the rate at which many in the real estate industry, including NAR, have predicted.
California’s real estate market remains, and will continue, on its bumpy plateau of recovery — a couple of quarters up, then a couple down, and so on. This means that every few months volume rises a little, then falls again, creating a zig-zagging vital status and spastic enthusiasm.
This pattern will continue for a few years yet, into 2016, and possibly beyond. Prices cannot move until sales volume is on a stable incline for nearly 12 months. We would love to say that is next year, but the data will not allow it.
The current upward bump in home sales volume (and the rare concurrent price rise) is due solely to speculators (flippers) and buy-to-hold investors jumping in simultaneously and creating ever more momentum. Alone, they purchased 33% of homes sold at trustee’s sales in the first quarter of 2012 and bought for cash 28% of all resale homes.
If this evidence is ignored, today’s sales volume upturn (like that of the 2010 market driven by federal purchase-assist subsidies) appears to be a recovery — except it’s not. Current sales volume isn’t driven by a sufficient, much less sustainable, demand in end users, i.e., owner-occupants. California just hasn’t reached anywhere near the level of employment growth or consumer confidence required to lure those marquee buyers out of the woodwork.
Everybody loves good news, but not at the sacrifice of the facts. If NAR’s thumbs are only capable of pointing one direction, let them celebrate:
- the permanent decline in the use of adjustable rate mortgages (ARMs); or
- the first-ever consumer protection regulation agency for the nation’s borrowers; or
- the renaissance of real estate fundamentals, this time imposed with oversight.
But until California’s economy gains strength, with job growth of at least 400,000 annually for 24 months, and more homes are again purchased by end users (a.k.a. owner-occupants), cheering a speculator-driven rejuvenation of the housing market is ignoring data at your peril and at best very, very premature.
Editor’s note — first tuesday has been a member of NAREE since 2009.
Re: “Housing experts offer ideas on the new normal in wake of downturn” from The Sacramento Bee