Little Transparency with the NAR

July 2, 2009 - (RealEstateRama) — The National Association of Realtors (NAR) is the largest trade organization in the country. With more than 1.1 million members, the NAR is a powerful group.  This powerful group of brokers and their agents performs transactions in a market segment that may well determine the length of the recession and the strength of the recovery.

Like many segments of the U.S. economy, this association bears a burden. Unfortunately when the country’s property owners need straightforward, reliable information, the NAR has chosen to straddle the fence.  Perhaps, the NAR has elected this course to protect its own who have sold residences and buildings that no longer sustain their values or perhaps the NAR is straddling the fence under the guise of assisting a recovery, but either way, the NAR is, in fact, delaying the recovery.

The National Association of Realtors lacks transparency.  They are like that agent who wants the listing and does not know how to tell the homeowner that the home just is not worth their asking price.  Like that agent, The NAR struggles to put the facts on the table in a clear, concise and transparent manner.

And, like the struggling agent with bad news, the NAR has the data the marketplace needs to be transparent and be straightforward.  Instead, the NAR shades the numbers or pads them, as the case may be.

Existing & Pending Homes Sales

For instance, take the NAR’s most recent “Existing Home Sales Report.”  The NAR reports that sales of previously owned home in the United States rose 2.4% in May to an annually projected rate of 4.81 million units.  The “Existing Home Sales Report” accounts for closed transactions involving homes that are not new construction.  The “Existing Home Sales Report” sounds good, doesn’t it?

The “Pending Home Sales Report” deals with transactions for existing homes that are not yet closed.  Pending sales usually close within two or three months.  The NAR’s most recent “Pending Home Sales Report” indicates the May pending transactions rose for the fourth straight month.  The last time that happened was in 2004.  While pending sales only rose 0.1% in May, it followed a rise of 7.1% in April.  The NAR interprets this to indicate the market is holding the upward trend.  Are you buying it?  Not, if you are smart.

The economic forecasting firm, MFR, Inc. made the following statement through its chief U.S. economist, Joshua Shapiro; “The pronounced increase in April and the fact that May sustained the rise does indicate that actual existing home sales are poised to rise in the coming month or two.”  Now, tell us again, Joshua, what planet are you from?  Wherever you are Joshua, get your eyes off the computer screen and walk around your neighborhood!  Better yet, talk to the neighbors and ask them if their homes are worth 80% of what they were (or were really not) two years ago.

The Pending Home Sales Report for May provided the following regional breakdowns:

* Pending home sales in Northeast +3.1%
* Pending homes sales in Midwest -1.3%
* Pending home sales in South -1.7%
* Pending homes sales in West +2.2%

Mortgage Bankers Trim $700 Billion

As all this good news was being released by the National Association of Realtors, the Mortgage Bankers Association (MBA) put out their report.  It was not as pretty and shrieked of reality.

In March, the interest rates dropped as the Fed’s announcement regarding the Treasury bonds and mortgage-backed securities coincided with the unveiling of the Home Affordable Refinance Program (HARP).  The Mortgage Bankers Association promptly put out the good word and projected an additional $800 billion in mortgage financing would be written in 2009.

Hmm?  Guess again.  On June 22nd, Jay Brinkman, the MBA’s chief economist put forth the following report; “While generally accepted estimates were that around 1.5 to 2.0 million borrowers might avail themselves of this program, with many more potentially eligible, to date only about 13,000 loans have been completed.

Would someone ask Jay to phone or e-mail these numbers to the NAR? Please?  From 1.5 - 2.0 million potential loans to 13,000?  By any measure, that is quite a slide.

The MBA announcement also substantially lowered its projections for mortgage originations.  The reasons cited were a larger than anticipated decline in home values, thus lower mortgages and the vast volume of distressed or short sales.  So, finally one organization is willing to talk about it.

The MBA trimmed a whopping $700 billion, almost the size of the stimulus package, from its projection.  $84 billion was cut from projected mortgage originations.

Distressed Sales Driving Market

The element that is causing the Existing Home Sales Report to rise and the Pending Sales Report to sustain its level is distressed sales.  Now, that is a strong market where homes that are selling, and selling aggressively.  So aggressively in fact, that 124 foreclosures are happening every day in Lee County, Florida, where Fort Myers is located and where unemployment is leveling at 12%.

Prices are down.  In certain areas, prices are way down.  In areas like Lee County, the future for a real estate recovery is bleak. Units that were valued at $800,000 two years ago are listed for $250,000.  Units that were once valued at $375,000 can be picked up in foreclosure for $45,000 - $50,000 every day, every week.

For some reason, the National Association of Realtors does not publicize the fact that the supply of unsold homes fell by 3.5% in May.  Perhaps, it is because it will take no less than 9.6 months to clear out the existing inventory.  That is if the current pace holds.  In areas like the Northeast, the peak season has just concluded.  Uh oh!

In May, distressed sales comprised 33 percent of all sales.  Remember, that is in the peak quarter for most areas.

The National Association of Realtors needs to conduct itself with more transparency.
Put the meat on the table, like that agent struggling to explain lower values.  The NAR must stop protecting its members and let the clients of the members know the hard, cold facts.

In the end, the NAR can lead the recovery.  The NAR can chart a course that will be painful but must be real.   The NAR can put the meat on the table and stop leaving sellers wondering, “where is the beef?”  That is what the NAR tells its members to do.  That is the transparency their reports should transmit, sans sugar coating, sans misleading information.  Tell the market the real numbers, the real values and we will overcome.

For Part 2 of The NAR article series, please visit http://www.onlineforextrading.com/blog

Tagged as: NAR