Steve has somehow become empowered, as three of the last four posts here bear his smiling likeness. This will simply not do. So, inspired by the need to regain some control and by the gauntlet thrown my way in Steve’s comment Monday regarding our latest San Diego Union Tribune article on the housing market (“I will leave it to Kris”), I am offering my thoughts on the subject.
The gist of the article by Dean Calbreath was that the National Association of Realtors®’ chief economist, David Lereah, has been inconsistent in his remarks, painting a falsely positive picture of the state of the real estate market lo these many months. His most recent remarks conceding that home prices will decline through 2007, Calbreath suggests, are long overdue.
I do not disagree with the article; I, in fact, applaud it. My take on Lereah’s failure to call a spade a spade is a little different, however. First, we need to remember that Lereah’s role is one of spin doctor. He is the Realtor®’s equivalent to the White House Press Secretary. The question is, are his remarks truly dangerous or even influential? (The other question is whether NAR even needs an in-house economist, but that is for another time).
My favorite Lereah-ism this past week, apparently no longer able to spread the “good news on the horizon” message with a straight face:
“Simply stated, a loan with the lowest monthly payment probably isn’t in your best interests – borrowers need to understand worst-case scenarios,” Lereah said last week. “If you’re in a mortgage you aren’t comfortable with, now is an excellent time to refinance, if you can, with historically low rates on safer conventional loans.”
“If you can” is the caveat that packs the punch. Those who purchased homes in the past three years will likely find that refinancing into a safer conventional loan is not in the cards. The buzz lately, of course, has been surrounding the subprime market woes. Simply stated, too many people who purchased homes over the last several years did so with low-down, adjustable loans, and now are finding a surprise package of higher, oft-times unaffordable payments, not to mentioned negative amortization issues. Couple that with a declining (or, in NAR speak, “correcting”) market environment where home values have not increased but in fact declined during this period, and you have the makin’s of a no-way-out crisis for many.
What is sad is that this was so avoidable. Yes, buyers need to accept more than a little responsibility for the purchase and loan decisions they have made. But how can the mortgage brokers and agents truly defend against the charges that buyers were coerced into biting off more than they could chew when their own professional lobby has been repeatedly singing the refrain to Everything’s Coming Up Roses?
Just “yesterday”, the Public Awareness Campaign du jour was “Buy, buy, buy”!
2007 marks the 10th year that the Public Awareness Campaign has been working on behalf of the National Association of REALTORS®’ members to educate and persuade consumers about the value of hiring a REALTOR®. This year, the campaign goes a step further by encouraging consumers to consider real estate as a strong long-term investment.
If David Lereah and NAR were at the helm of Best Buy, then their approach is a good one. “Everyone needs a plasma TV whether they know it or not, and owning the biggest TV on the block has never been easier”! This is a classic latent demand approach; if I have to move electronics, it makes perfect marketing sense to create a buzz, to generate excitement, and to manufacture a wide-spread demand for my product, whether one exists or not.
Homes, however, are not bought and sold in this manner, and you can not manufacture a demand for a lifestyle or a true necessity: Shelter. Some will defend Mr. Lereah’s past inaccuracies as unfortunate errors inherent in any forecasting activity. I am not so generous. From our perspective in the trenches, Steve and I saw and acknowledged (both here and to our clients) the correction coming long before it was here. And, one can argue all day long that failure to predict the future is forgiveable. Failure to admit reality once it is upon us and speak the truth, in my opinion, is not.
Phoenix agent-extraordinaire Russell Shaw said about Mr. Lereah:
I don’t think most REALTORS even know who he is, or what he has to say – let alone the general public. I don’t believe that most people who live in the United States give a crap what he or anyone from the National Association of Realtors has to say about much of anything. Therefore, I don’t see how anything he may have ever said (knowingly or unknowingly wrong) could possibly have “harmed” anyone.
“Harmed”? No, I doubt that as well, except to the extent that his sound bites continuously appear as headlines in the local paper or lead-ins to the top story on News at Five. The public may not remember that a quote was attributed to “David Lereah, National Association of Realtors®”, but what they do hear is “blah-blah-blah-Realtors®”. That is my beef.
I think we will all agree that NAR and Lereah, in their questionable statements, are simply trying to do their job – They are trying to provide advocacy for the real estate industry. They are a lobby, and they are lobbying on our behalf. However, if you want to truly help me, I submit that you rechannel your energies into working toward building an industry that needs no public relations campaign. Try self-policing, try tightening licensing requirements, and make sure your house is clean and ready for company before you spend all of your efforts begging people to come to your party.
In 2006, the California Department of Real Estate reported that there is one licensed real estate agent for every 52 adults in the state. This presents a bit of a supply and demand issue, wouldn’t you agree? It would seem that NAR’s answer to this is to encourage more people to move more often. Too many agents? Let’s just churn more homes. Forget that, unlike the discretionary flat screen purchase, people will buy and sell real estate when they need to buy and sell. Of course, many of today’s agents will be working at Best Buy tomorrow. Supply and demand.
So, NAR, if you want to help me, please stop focusing on the spin and start minding the store. If you want to help your Association, take a step back and consider our image crisis, recognize that it is sadly, often deserved, and work toward renovating our industry practices and strengthening our licensing requirements. Start insisting on a true level of professionalism and ethics among real estate professionals, a level of professionalism and ethics similar to the one that you promote already exists. Accomplish this, and you just might find that there is no longer a need for the spin.
(As a footnote of some interest, Steve was approached by a Title Company representative yesterday at a Brokers meeting who, in reference to the “terrible” San Diego Union article, assured him that they were working on a rebuttal piece in our defense. Alas, we still don’t get it).