San Diego Real Estate Library

San Diego real estate library

Real Estate Forecast - Don’t Believe All You Read

By Bob Schwartz, San Diego real estate broker - San Diego real estate blog

Having been a member of the National Association of Realtors (NAR) for three decades, I cannot recall the Association forecast being anything but overly optimistic. I'm also a member of the San Diego Association of Realtors and the California Association of Realtors; the same holds true for their forecasts.

I believe realtor associations serve a noble purpose, but I do have a problem with these associations putting out an economic forecast.  How can any forecast done by an economist who is an employee of trade associations whose membership is based on real estate sales, possibly put out an accurate forecast for real estate trends if those trends are anything other than positive. So is the association actually enhancing the image of the Realtor by giving accurate guidance to the general public by issuing continual rosy forecasts?

Sure, on occasion the forecasts may provide a milk-toast opinion of possible market slowing. This is so rare and so wishy-washy as to be laughable. The real estate-buying public is becoming much more sophisticated and it's my opinion that the constant overly optimistic outlook of the National Association of Realtors is making the association and all its members look foolish to say the least.

In February of 2005, then NAR chief economist Mr. Lereah published a book titled: “Are you missing the real estate boom?  The boom will not bust and why property values will continue to climb through the end of the decade — and how to profit from them.”  Shortly after the publication of this book, many real estate markets including San Diego's, took a distinct downward trend which has continued through to today. NAR’s December 2005 forecast for 2006 said existing home sales would fall 3.7% and new home sales would fall by 4.8%.  It appears the facts were so overwhelming; NAR could not issue a positive forecast, so they issued the mildest 'soft' market report possible. If the general public relied on this report, they would have been served very poorly. The data released in December 2006, actually showed existing home sales fell 8.6%, more than twice the NAR forecast. Plus, new home sales fell 17.8%, which was almost 4 times more than the NAR predicted.

In December 2006 the chief economist for the NAR said: “Most of the correction in home prices is behind us, but general gains in value next year will be modest by historical standards.” It was said in this report that existing home sales were expected to be off 1% and new home sales to fall 9.4%.  What actually occurred for 2007 was that existing home sales took a fall of 12.3%, and not the 1% estimated by the NAR.  New home sales were down about 25%.

What is the latest NAR forecast? For 2008, the NAR is projecting existing home sales will increase very slightly, and the median home price should also increase.  Also predicted is that new home sales will continue to fall sharply in the range of about a 12% drop.  In the report NAR speculates that for the largest part of the market, existing home sales, the bottom has come, and 2008 will be a turning point.

Based on their last two yearly forecasts, is the NAR's 2008 projection, accurate?  With the Fed dropping interest rates hand over fist, I think there is a 50-50 possibility that finally NAR’s projection may be close to reality.  If the housing market numbers for 2008 come anywhere close to NAR’s projection will it vindicate the necessity for the association having an economist on staff?  To me it's kind of like a broken clock; it will be correct at least twice during a 24-hour period.

I believe the NAR should leave the forecast up to the government and the Wall Street economists and just report the actual housing numbers.  Let's face it; it's not always a good time to buy real estate.  Let's try to enhance the general public’s perception of Realtors by sticking to the facts, and leaving the future trends, opinions and forecast to others.  

Use of this article without permission is a violation of federal copyright laws.

San Diego real estate library