Back in late 2006, I wrote a couple of articles critiquing the U.S. National Association of Realtors. At the time, the NAR had run a series of full-page ads in national newspapers proclaiming “right now may actually be one of the best times to buy a home.”
The ads all had the same theme: Interest rates near record lows, large inventory of homes for sale won’t last long, home prices overall have stabilized, real estate is a great investment, and don’t delay… buy a home.
I argued against all these points, saying it was likely one of the worst times in history to buy a home in the U.S. In my opinion, the NAR, knowingly or unknowingly, was misleading consumers. However, because of the mounting number of realtors with dwindling commission checks, I believe there was pressure on the NAR to reassure consumers for the benefit of their realtor members.
Yesterday, the National Association pulled an about face. It came out and said the subprime loan problem will make it more difficult for consumers to get loans on homes, thus causing U.S. existing home prices to fall this year for the first time since the NAR starting keeping track in 1968.
I’m sure the NAR is a great association. And I’m sure it does a great job in keeping its members and consumers informed. One could argue there was no signal that the subprime market was falling apart. And realtors don’t lie on purpose. Like other people that sell big asset items, maybe even like stock brokers, these people are not economists. They are trained to know the laws and sell.
But, on the other hand, common sense always prevails. When consumers are able to borrow money to buy a home without showing proof of income, when 100% is available, when speculation is running rapid, when prices for homes are rising at an alarming rate, sooner or later the market needs to work off the excess created in the marketplace. And that’s exactly what is happening right now.
The correction in the housing market, in my opinion — as this entire article is only that, my opinion — could take years to work its way through the system. Better deals are ahead.