David Lereah: Only Following Orders

Read Nancy Keates article in the Wall Street Journal about former NAR lead economist, David Lereah, as he comes to Jesus about the housing market crash and the impact of NAR advice on hundreds of thousands of Americans.

Is this the part where Americans are supposed to be "shocked" by such a story?

I guess so.

Wow.

"Mr. Lereah, who says he left NAR voluntarily, says he was pressured by executives to issue optimistic forecasts -- then was left to shoulder the blame when things went sour. "I was there for seven years doing everything they wanted me to," he said, looking out his window to his tree-filled yard in this Washington suburb. Mr. Lereah now works at home, trying to rebuild his career and saddled with a sagging portfolio of real-estate investments."

Really? "Optimistic forecasts?"

Gee, whatever do you mean, David?

Realtors across the country willingly pay dues to this same association, the National Association of Realtors (NAR), which, in exchange for the cash, provides ethics training for its members (*ugh*), housing market statistics and kool-aid flavored commentary to the prospective home-buying American public, usually in the form of bullish messaging, like "Buy now!", "Rates have never been this low!", "Get in now while you still can!", and that all-time real estate agent favorite: "It's a great time to buy a home!".

And that messaging worked.

The WSJ article does not close without first appealing to our sensibilities. Afterall, Mr. Lereah has lost out as well. He's apparently lost hundreds of thousands of dollars on his own personal housing investments too. And more importantly, he may have lost credibility as an renowned economist.

Intentionally painting a rosy picture of a unsustainable housing market situation is not what housing economists are normally paid to do. They're usually paid to be objective, factual and to interpret the incoming data with great care, because Americans consumers often make financial decisions based upon those interpretations and trends. Mr. Lereah had an important responsiblity.

So it must be a steep challenge indeed for one to re-establish credibility in the shadow of intentionally misrepresenting data all in the name of satisfying an employer's crooked business objectives, or for that juicy six figure paycheck.

This is all such a huge joke.

As long as we have Realtor sales commissions directly tied to the value of home sales prices, American consumers will face a conflict of interest. The business relationship is sort of damned from the start.

Even if we choose to assume that Realtors provide a valuable service, and that this service should be paid for by consumers (for all the marketing materials, providing professional consultancy on local real estate conditions, negotiating pricing and terms on behalf of the buyer, etc.), there is no way such Realtor services should be a a function of the home sale price.

This would all go away if Realtor sales commissions were instead tied to a fixed fee not at all linked to the sales price of the house and more a function of the value of the consultancy provided (i.e. a measure of the consumer's risk in choosing the wrong home, or paying the wrong price, among other variables).

Change is needed, because otherwise we will continue to see Realtor-funded organizations like the NAR, and state-based versions thereof, do everything they can to preserve high home prices, preserve low interest rates, etc., and for what?

For their own personal gain.

Consider that right now that the best thing for our anemic American economy (and for a speedier recovery from the housing downturn) might just be the opposite of what American Realtors want:

- stronger enforcement of fundamental mortgage lending standards (documented lending processes) and borrower qualifications.

- strict adherence to realtor code of conduct

- higher bank and mortgage interest rates, increased motives to save money and a strong US dollar currency.

- lower (and more affordable) single family home prices that reflect market fundamentals like real take home earnings of prospective buyers

- 25-30% downpayment requirements

- open access for consumers (prospective home buyers) to all home listings

If Americans wish to know how we got into this financial mess, they may not need look further then their local real estate agents who cheerleaded hundreds of people to buy homes that they could otherwise never really afford, homes that "never go down in value", who tapped the shoulders of local mortgage buddies around the corner who suggestively sold poor quality, adjustable rate mortgage instruments, that the consumer could (in theory) "always refinance".

If college textbooks ever get around to printing a few case studies on the Great Housing Crash of 2006, they might mention that there was an even greater problem than David Lereah, the NAR, the Fed, the SEC, and Realtors themselves. It was the laziness of the American media and complete lack of investigative journalism.

From CBS's "60 Minutes" to CNN to Fox to even the LA Times. Media outlets continue (even today) to turn to discredited NAR and CAR representatives for interpretations of the housing market data, as if they are "trusted advisors" for the real estate industry, when that claim must instead be officially surrendered for all time or until the real estate industry reforms for the better.

In the meantime, fixed rates for realtor services, full and free access to market information for consumers, and then let us allow the market shake itself out. It always does.

And as for Mr. Lereah, if that consultancy gig doesn't work out, I suppose he can always become a Realtor.

If you trust realtors, you are delusional.

Here's why:

If the NAR chief economist David Lereah, realtor posterboy extraordinaire, and the more prolific cheerleader of the American real estate industry boom over the last 5 years, author of infamous books like these:

then stated in late 2006 that the market was now in correction mode, but that we were all certain to experience a "soft landing", who then stated in late December 2006 and again in February 2007 that "we've hit bottom" already.

Now it is May 7, 2007. Mr. Lereah already has his bags packed up, ready to leave the real estate big leagues of the National Association of Realtors, and join a new, hole-in-the wall, real estate sales organization called Move, Inc.

But the final act in the play has not yet been shown. Prior to providing his last major NAR speech at an upcoming Washington real estate conference, the Bob-Saget-Look-Alike, Mr. Lereah, had the audacity to make this admission - probably the most damning one ever about the current American real estate market.

"Ask him in a couple of weeks", indeed! I think by now, Mr. Lereah, we already know what your duplicitous reply will be.

Bob Saget

Also, Bob Saget

So, I ask you: how can any prospective homebuyer in America today turn to a home realtor in good faith anymore for "help"in purchasing a home, assist them making the right choice, and work to protect his financial interests?

I submit to you that he cannot. Not anymore. The game is up.

Bob Saget has played you all, the home consumer, the realtor, the mortgage lender.

Time for the theme music to start. This really is America's Funniest Home Videos.

Mr. Lereah, you have a credibility problem.

In case America's real estate agents haven't figured it out yet, they need a new spokesperson because the one they have, Mr. David Lereah, has lost credibility.

After consecutively denying the existence of a housing bubble in 2005 and 2006, then later retracting and insisting in 2006 that a "soft landing" surely awaits the American housing market, then going back on his previous market hype to forecast a down year in 2007, but one that will still grow at historic levels over 2006 results, to then in February 2007 insinuate a recovery for the American real estate market, to today - forecasting a real estate market recovery only sometime in 3rd quarter 2007 following devasting news that existing home sales declined 8.4%, the worst sales performance for the real estate industry in 18 years.

By now it should be obvious to prospective American homebuyers, future home sellers, economists, mortgage lenders and even realtors themselves that the N.A.R. cannot be viewed as a trusted advisor any longer with respect to the real estate market. It's motivations are completely and utterly duplicitous. There is no interest in sharing with the public full and unfettered, objective housing market data.

The N.A.R. continues in April 2007 to promote the idea that today is no less a "great time to buy" than it was in 2006 or 2005 - despite completely different real estate market growth patterns, rising inventories, declining home values, declining home prices and heavily restricted real estate market financing conditions, not to mention completely different economic circumstances, not the least of which is the all-but-decapitated U.S. Dollar!

It's about time for people to quit their bitching and come to accept the National Association of Realtors for what they are. The N.A.R. is simply a pseudo-public relations organization for realtors whose sole motivation is to sell property and earn commissions on the value of that transaction. The N.A.R. is constantly trying to sell. Once that relational vector becomes well understood by the American public and the mainstream media, it might call into questions some of the assertions made by it's President, posterboy spokesman Mr. Lereah and its 1.3 million members.

Some realtors have been in the industry a long time and have worked their asses off, surviving by referrals through the roughest of markets. Before you select a realtor, I recommend you ask them what they did from 1989 to 1999. Many have obviously proved themselves, demonstrating strong business ethics, and have chosen to help people objectively. They know the ins and outs, and are even more fed up with the N.A.R. than the lay person.

But the majority of realtors, I submit, are unlicensed or poorly licensed, poorly trained, inexperienced, opportunistic, self-centered, easily corrupted, and dead-focused on earning that 6% commission check. To hell with convention, business ethics and regard for your fellow man, they want that commission check! How else are they supposed to make payments on that f*** off huge Hummer they drive around town with their realty website and cell number painted all over it?

Realtors are basically all about a business transaction. Many prefer to portray themselves as some sort of societal counseling service for America: to go that extra mile to "help you and your family find that perfect dream home - just for you. It's all about you".

Bullshit!

Realtors want the transaction done and they want their freaking money! Period. And all of the stupid questions you ask, repair demands, price offers and counter-offers during price negotiations are nothing but Tourette's-inducing irritations obstructing the path to THEIR commission check.

The mere idea that the N.A.R. is somehow of help and "looking out for the interests" of prospective homebuyers and homesellers is so ridiculous anymore, it no longer is funny. It's infuriating. Ask the thousands of subprime homedebtors about their realtor experience. They'll tell you, and in detail, exactly how helpful they were in getting that loan to secure their dream house.

If there is a positive to the 2007 U.S. housing crash and David Lereah's repetitive PR goofs (read: lies) as to the U.S. real estate market's true condition, it is that some daylight might now expose the N.A.R. charlatans for what they really are, and might convince more Americans to show vigilence when selecting a realtor - or even first determining whether a realtor is even needed!

Remember today's quote: "There is no way to spin this news" - David Lereah, National Association of Realtors, April 24, 2007.

If that is the really case, Mr. Lereah, then perhaps you're no longer as useful to he N.A.R. as you used to be?