Tuesday, January 13, 2009

We Won't Call Him "Jacka**" or "Liar-eah"

We'll let other folks call former National Association of Realtors economist David Lereah such names. But it's too bad a former UVa professor is so widely disdained. Lereah is the author of "Why the Real Estate Boom Will Not Bust--And How You Can Profit From It."

The book is subtitled "How to build wealth in today's expanding real estate market." Nowadays it may be found at Barnes & Noble in the "Fiction" section.

Lereah is bounding back into public view this month, perhaps missing the platform that the National Association of Realtors afforded him from 2000 until his departure in April 2007.

In a 1/12/09 article in the Wall Street Journal, we read:

NAR, which represents half the 2.6 million licensed real-estate agents in the country, has its critics. One concern is that while the organization collects and releases objective data about home sales, it also provides commentary on those statistics -- and has a mission to advance its members.

Lawrence Roberts, author of "The Great Housing Bubble," says the Securities and Exchange Commission should regulate NAR the way it regulates financial advisers. "Realtors are currently able to make any statement they wish regarding the investment potential of real estate, no matter how ridiculous," he says.

Mr. Lereah admits to one mistake: believing there would be no national housing crash. "I have to take the blame for that," he says. "I never thought it would be as bad as this."

Lereah's house, and the several condos he bought as investments, have declined by 20% or more recently.

The WSJ article came about from a recent short interview in Money Magazine:

(Money Magazine) -- Q. Were you wrong to be so bullish?

A. I worked for an association promoting housing, and it was my job to represent their interests....I put a positive spin on [numbers]. It was easy to do during boom times....I never thought the whole national real estate market would burst.

Q. The NAR's latest forecast calls for a slight increase in home prices next year. Thoughts?

A. My views are quite different now. I'm pretty bearish....Home prices will continue to drop. I think we'll see a very modest recovery in sales activity in 2009. But we've still got excess inventories, a bad economy and a credit crunch that will push prices down further, another 5% to 10% more. It'll take a long time to get back to the peak prices we saw in many markets.

Q. Any regrets?

A. I would not have done anything different. But I was a public spokesman writing about housing having a good future. I was wrong. I have to take responsibility for that.

Barry Ritholtz, over at The Big Picture, says:

Of all the various parties who contributed to the boom and bust in housing and credit, none have escaped more unscathed than the National Association of Realtors, and their former Baghdad-Bob-in-Chief, David Lereah.

The NAR turned a blind eye to fraud amongst realtors in terms of referrals to corrupt appraisers and mortgage brokers. They constantly cheerleaded prices, despite evidence to the contrary. For 3 years, they have been forecasting 2nd half price recoveries, dissuading realism amongst home sellers. They continually spun data, presented misleading commentary, and otherwise engaged in behavior that could only be characterized as sleazy.

Ritholtz is the one who calls Lereah a "jackass."

Lereah is now a "real estate consultant." Subscriptions to his internet newsletter are $495 a year. There are currently 50 subscribers.

Lawrence Yun, the current NAR economist, addresses Lereah's forays into the media. He does not, however, attempt to disupte anything Lereah says, or has said in the past.

Why would he? Just one year ago, January 2008, NAR was still pegging real estate as a "Great Investment." And the paid economist for the trade association for half of the nations's real estate agents needs to keep as many folks as possible working on transactions. Even if it's with puerile ads like those in the 2009 Public Awareness Campaign.

Yun, who is harshly criticized around the web as well (there's even a blog devoted to this) "comments" on Lereah's appearances here.

1 comment:

Anonymous said...

If this guy was a stockbroker, the SEC would have nailed him and he'd be in jail. He's the real estate equivalent of Bernie Madoff. He didn't have people's money in his hands, but he had their confidence and their belief. He's helped contribute to the terrible economic conditions we currently face. Actually, he is in a kind of jail. Wherever he goes, people hate him.