More Real Estate Nonsense

The Natl Association of Realtors gushes Big Rebound in Existing-Home Sales Shows First-Time Buyer Momentum. In fact, sales DROPPED in September despite the rush to cash in on Clash4McMansions (the home buyer credit that expires shortly). Chart from Calculated Risk, as modified by The Big Picture. Barry Ritholtz says this of NAR:

I am honestly unsure of whether the folks at the NAR are dumb as lawn furniture and make these misrepresentations honestly — or whether are just another group of disgusting spin doctors, willfully peddling lies because it helps their own agenda.

The NAR report relies on seasonally-adjusted data. Actual sales dropped 5% from the prior month. This is less than the normal drop from August to Sept, hence the gushy headline, but then again normally there aren’t Cash4Gimmicks incentives skewing things. Distressed sales also made up 29% of the results. In a followup at Calculated Risk, Existing Home Sales: More Activity, Little Achievement, the distressed sales are distorting the results but are a necessary step forward – getting rid of the past overhang. As I noted in a recent post, however, that overhang is increasing pretty fast for Prime loans even as we work through the subprime disaster from the last few years.

Mark Hanson does a pretty devastating analysis of the gimmickry. When the first-time buyer incentive expires in a month, the same sort of drop-off we are seeing in auto sales after Cash4Clunkers should shock & awe.

Rather than declare premature victory and rely on short-term gimmicks, we need to let the market work through the overhang. Only after that can housing return to normal. Sadly, pushing gimmicks to incent new purchases by people of marginal credit only sets in motion a new overhang when they get into trouble.

About Duncan Davidson 228 Articles

Affiliation: NetService Ventures

Duncan is an advisor to NetService Ventures, where he focuses on digital media and the mobile Internet.

Previously he was at four start-ups: Xumii, a mobile social service based on a Social Addressbook; SkyPilot Networks, the performance leader of wireless mesh systems for last-mile access, where he was the founding CEO; Covad Communications (Amex: DVW, $9B market cap at the peak), the leading independent DSL access provider, where he was the founding Chairman; InterTrust Technologies ($9B market cap at the peak), the pioneer in digital rights management technologies, now owned by Sony and Philips, where he was SVP Business Development and the pitchman for the IPO.

Before these ventures, Duncan was a partner at Cambridge Venture Partners, an early-stage venture firm, and managing partner of Gemini McKenna, a joint venture between Regis McKenna's marketing firm and Gemini Consulting, the global management consulting arm of Cap Gemini.

He serves on the board or is an adviser to Aggregate Knowledge (content discovery), Livescribe (digital pen), AllVoices (citizen journalism), Xumii (mobile social addressbook), Verismo (Internet settop box), and Widevine (DRM for IPTV).

Visit: Duncan Davidson's Blogs

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