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Realtor economist ‘apologizes’
October 10th, 2007, 3:27 pm · 18 Comments · posted by Diana McCabe
The Register’s Jon Lansner and Jeff Collins survived a hotel lunch to file this from the Realtors convention in Anaheim. …
California Association of Realtor chief economist Leslie Appleton-Young had a confession to make at the annual forecast lunch, or as she put it “an apology of sorts.”
Two years ago, amid a red-hot market, her forecast dismissed fears of a bursting California real estate bubble and called for only modest sales declines.
Two years later, the state’s seen a dramatic sales drop. In August 2005, the cyclical peak, sales ran at an annualized rate of 650,000 homes. By year end 2007, Appleton-Young foresees the sales rate under 300,000.
“We’ve had a fundamental change in the mindset of the buyer,” she says. “There is no reason (for a buyer) to act.”
Especially, deep-pocketed buyers. This year to date in California, sales of homes above $1 million are about flat vs. 2006. Sales under that mark are off roughly 24 percent.
That trend is why the statewide median price is still showing slight gains, as pricier homes pull up the mid-point of all sales prices. CAR expects statewide prices to fall 4 percent in 2008, the worst since 1993.
“This was more fun three years ago,” Appleton-Young told the group as her forecast ended. “But we need to deal with reality.”
Cas Pinkowski, former president of the O.C. Association of Realtors and managing broker for RE/MAX Real Estate Services in Aliso Viejo thought Appleton-Young was “pretty right on.” Pinkowski acknowledged that Appleton-Young’s 2007 forecast was off, but added: “What we have to do is realize this is a shift in the market that happens every 10 years. We just have to keep our nose to the grindstone.”
Pinkowski said he’s hoping that the Orange County housing market will see a recovery in the spring of 2008. Neighboring areas in the Inland Empire, however, will take longer to see a recovery.
Bill Plattos, executive vice president and broker at First Team Real Estate, said of Appleton-Young. “I like the part that she was willing to admit she didn’t get it right on (last year). But no one expected the liquidity problem to hit like it did. … I think that’s what threw her off.”
Plattos expects the housing market to recover sometime next year: “I think basically we’ve hit bottom. With Bernacke doing what he did, … I think things are starting to change already. I know I’m optimistic, and I’m a Realtor. … But people are going to get back into the mode of getting their dream home and not just (buying houses as) an investment. … This is not a flip-it time.”
October 10th, 2007 at 8:15 pm
[…] Realtor economist ‘apologizes’ […]
October 11th, 2007 at 9:41 am
Well it is a start of acknowledging reality. But I would rather all of the people quoted in this article would just say that PRICES ARE TOO HIGH!. Why is it always some external force like rates or credit crunch or negative press or mindset of the buyer or sunspots.
October 11th, 2007 at 10:06 am
What makes them believe that this housing market phase should turn around so soon? It would help if Realtors would study some finance and economic history. Realtors always state that housing markets go in cycles. Up and down cycles. That certainly is true, but why should a down cycle only last for 1year when the up cycle was much longer. And not only was the bull phase longer, it was also extreme in terms of speculation, the lending environment, and the appreciation of home prices. Taking all this into consideration, why would we see a turn-around already in 2008?
For all Realtors, Loan Agents and anybody else in the RE industry. Why don’t you study the Florida Land Boom of the 1920s and the Japanese Housing bubble? And for todays homework, answer the following questions:
a) what the mass psychology was like during the bull phase
b) how lending practices contributed to the Real Estate up cycle
c) How long the down cycle lasted & how much depreciation took place
d) Are there any similarities between 1920 in Florida, 1980s/90s in Japan, and the US/OC housing market of 2000-2007.
We’ll discuss this in detail at the next OCAR meeting
October 11th, 2007 at 10:25 am
She says “the Orange County housing market will see a recovery in the spring of 2008″. I’m betting she’s going to be wrong again. She also said “I think things are starting to change already”. Obviously she doesn’t know how to read. Pick up a newspaper, go to the internet lady. She must be reading something from Gary Watts. This is why people can’t trust Real Estate Agents, all you get from them are lies. I work with RE agents every day and I’ve been hearing the same stupid things from them for the past 18 months, one told me last week “I’m glad this downturn is finally over and we can all start getting busy again”. The funny thing is I just heard her office manager say the same thing 10 minutes earlier during the weekly office meeting. Real Estate Agent have no credibility. People can sell their own property, put in a little work and save yourself $40,000.
October 11th, 2007 at 10:31 am
Speaking of Gary Watts, I posted this over on HBB yesterday.
Just visiting Gary Watts’ predictions at impactre.com. Looks like he has removed his detailed predictions for 2007, and only his 7% appreciation number remains.
Gone is his critique of the “headlines” predicting doom.
Gone is his predictions for 2007, including the end of the subprime issue, inventories of only 6-8 months in OC and a rise in house prices in Q4.
Guess he doesn’t want the accountability, but thank goodness for google cache
October 11th, 2007 at 10:48 am
New 2OC
Thanks for the heads up on Gary Watts website. Looked it over. I guess that is why there is no governing body on who can be called an ecomomist. What a cheerleader. He never acknowledges RE fundamentals anywhere, never notices affordability issues anywhere.
October 11th, 2007 at 10:54 am
Compare what you see now with his mid-year projections:
http://72.14.253.104/search?q=cache:4kb5GbzETtEJ:www.impactre.com/web2007forecast.htm+web2007forecast+site:impactre.com&hl=en&ct=clnk&cd=1&gl=us
October 11th, 2007 at 11:01 am
I’m simply tired of the criticism that is directed to real estate agents and the industry. Here’s a bit of history:
“A home is where the bad investment is.”–San Francisco Examiner, 1996. In actuality, home prices tripled between 1996-2006.
“Financial planners agree, houses will continue to be a poor investment.” Kiplinger’s Personal Financial Magazine, 1993.
“The Bubble Burst in housing will be this year.” UCLA Forecast, 2002
In 2002, we experienced 17% appreciation followed by another 17% in 2003.
So you would trust the media with its affinity for doom and gloom reporting? In 2000, the average sales price in Orange County was $300,400 and by 2005 it was $623,275. That’s a 14.75% increase over a 6 year average.
Don’t be fooled. Homes are selling in California. People are buying.
October 11th, 2007 at 11:20 am
Readers would be are better off digesting the comments section of your postings,and ignore the experts. Most of the comments refer to affordability, which is key. One of the lessons I learned in the stock market, when everyone is in there is no one left to sell to.
October 11th, 2007 at 11:31 am
Im all for anybody in business being optimistic about what it is they are selling. It just seems a little bit negligent on the part of this economist to state something that is more likely not true. To me its RCA saying vinyl records are going to be big again in the spring that the CD thing is just a fad.
I think it is obvious to most consumers that the housing market has changed dramatically. I think it is for the best. As far as a RA is concerned that should look to selling a larger volume of homes at a reasonable price, than trying to make all their money in one shot.
I feel that the volume of RA now is much like all the day traders of the 90’s. Everyone can and was doing. Now the true professionals and the hardworking people are the ones that will prevail.
I agree if you can do it on your own, go for it.
October 11th, 2007 at 11:34 am
Good point. That being said, what do you think of the stock market right now? They say there is plenty of money being put to work.
October 11th, 2007 at 11:57 am
Righhhht … the sort of apology you offer to set the stage for yet another obviously self serving lie; “I think basically we’ve hit bottom.” Oh really! … based on what? … your income?
Bernacke made a few headlines and that gave CAR a speaking point. Bernacke’s impact is not so great. Not really, the easy money is still dried up and lenders have still over tightened their lending standards to ride this out. The Fed hasn’t come to real estate industry’s rescue to facilitate new loans.
“… But no one expected the liquidity problem” … Oh PULEEEZE; EVERYONE expected the easy money to dry up and with heavy consequences too, they just didn’t know which month that would happen. It seems he had hoped the party would last just a bit longer than it did.
P.S.
People say such transparent things in polite settings where no one is going to jump up and laugh at them or challenge their motives in any unrehearsed way.
P.P.S.
I’ve never posted, but this insulting “apology of sorts” could have only been tolerated at a CAR convention.
October 11th, 2007 at 12:49 pm
Greg:
My comment was about the stock market.
October 11th, 2007 at 4:06 pm
Dana,
“The Bubble Burst in housing will be this year.” UCLA Forecast, 2002
In 2002, we experienced 17% appreciation followed by another 17% in 2003.”
To be fair here, Real Estate should have started to correct towards the end of 2001 or beginning of 2002. You can look at many key variables that would support that. Who could have thought that Greenspan was so stupid to lower interest rates to all time lows? I say stupid because it was irresponsible and absolutely not in the best interest of this country. Without those artificially set low interest rates this Credit bubble couldn’t have taken place and the dollar wouldn’t have lost so much value.
However, economists should have realized that the Real Estate will not correct yet due to the irresponsible Greenspan interest rate policy. So while it was ok to sell in “late 2001 / early 2002-ish” the various indicators signaled to buy back into the market. Economists should have realized the bullish signs of RE the latest by the end of 2002, very early 2003.
http://www.federalreserve.gov/releases/h15/data/Monthly/H15_FF_O.txt
So were they wrong with that prediction. Yes. Is it ok to change your forecast with very unexpected changes in key market variables? Absolutely. The problem we currently have is that even 1% interest rates wouldn’t save this housing market anymore as those rates were already part of the cycle. The Japan housing bubble supports that theory.
I’m very bearish on RE unless/until I see huge USD depreciation to the extent that they will replace the USD with the Amero or some other currency. At that point I would turn around and join the bulls. Until then I enjoy precious metals and PM mining stocks appreciation and might do a quick foreclosure flip if the numbers make sense.
The question is not whether a leveraged investment is worth more in the future. It most likely will. The real question is whether people can hold onto that investment until it’s worth more in the future. Herein lies the problem for all those multiple home owners and “wannabe Real Estate Investors”. This market was all but ordinary and it might take 20+ years for home prices to be worth again as much as in 2005/06. Look at Japan and what their home prices did between 1992 and 2007…
October 11th, 2007 at 4:09 pm
aeromech dude,
How about the timing of Greenspan stepping down as the head of the Fed. What a coincidence that he created this big Credit mess, encouraged ARMs, and stepped down months before the sh!t started hitting the fan. Greenspan is smart, he and the Federal Reserve just don’t have the best things in mind for this country and the average citizen.
October 11th, 2007 at 6:52 pm
I bet Roc is shaking his fist at the monitor saying “where the F were you at last year when I needed you to stop me from buying at the peak and not believing your lies???!!! I could have taken my 400k and invested it and made money instead of dropping it into a money pit!!”
October 11th, 2007 at 7:00 pm
Thanks Dana, I needed a laugh today.
Priceless!
October 12th, 2007 at 7:31 pm
“Don’t be fooled. Homes are selling in California. People are buying.”
Just because a relative handful of homes sell doesn’t mean all is well.
Leslie finally got it right - there is “no reason” for buyers to act.
Here are some facts that led to her epiphany:
During the month of September In San Diego County there were 14113 single family detached listings available for sale. During the same period, only 952 of those properties went into escrow. Thats 952 out of 14,113. That equates to 445 days or 14 months of inventory.
“This is why people can’t trust Real Estate Agents, all you get from them are lies.”
Not from all of us.