Hiatus
I expect to be unable to post over the next week, so I'll try to front a couple of interesting articles between now and next Saturday.
From The Wall Street Journal, Jan 2009:
Realtors' Former Top Economist Says Don't Blame the Messenger
By NANCY KEATES
FAIRFAX STATION, VA. -- On a recent weekday, David Lereah sat in the sunroom of his five-bedroom colonial house. The only sound was the yapping of his dog Maisy.
Once one of the world's most-visible housing experts, Mr. Lereah is disconnected from his old life. The former chief economist for the National Association of Realtors says the group's top executives won't return his phone calls. He says he wasn't invited to the association's 100th birthday bash last May.
Mr. Lereah, 55 years old, is one of many prognosticators who won professional accolades during the housing boom, only to see their reputations wither in the bust. Throughout 2005, when home prices in the U.S. hit their fifth consecutive annual record, Mr. Lereah was on television so often his wife, Wendy, would catch him by accident. He flew first-class to meetings and speeches in places like Hawaii and Aspen, Colo., staying in suites at expensive resorts. His bosses awarded him more responsibility. That year, he published his second book, "Are You Missing the Real Estate Boom?"
Mr. Lereah continued to make rosy statements amid growing signs of a housing downturn -- like this declaration in January 2007: "It appears we have established a bottom." A few months later, NAR announced that existing-home sales fell 2.6% in April from a month earlier and 10.7% from a year earlier.
Some critics pummeled Mr. Lereah for his optimism. Bloggers nicknamed him "Baghdad Dave," after the Iraqi information minister Mohammed al-Sahaf, called "Baghdad Bob," known for his pro-Iraq press briefings at the time of the U.S. invasion.
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.
A spokesman for NAR says Mr. Lereah used the same kind of forecasts in his book, which wasn't an NAR publication.
NAR, which represents half the 2.6 million licensed real-estate agents in the country, has its critics. One concern is that while the organization collects and releases objective data about home sales, it also provides commentary on those statistics -- and has a mission to advance its members.
Lawrence Roberts, author of "The Great Housing Bubble," says the Securities and Exchange Commission should regulate NAR the way it regulates financial advisers. "Realtors are currently able to make any statement they wish regarding the investment potential of real estate, no matter how ridiculous," he says.
"Realtors are the most trusted resource for real estate information," says the NAR spokesman in an email, adding that the group "has gathered the most comprehensive data on real estate in the world." The spokesman says that during his tenure Mr. Lereah was "solely responsible for the content of NAR forecasts and housing reports -- both the data and the interpretation."
Among the who's who of experts and policy wonks now accused of irrational sunniness are former Federal Reserve Chairman Alan Greenspan and Robert Toll, chairman and CEO of Toll Brothers. But Mr. Lereah has gotten more than his share of the finger-pointing in part because he was such a public face during the housing boom.
Raised in the suburb of Long Beach, N.Y., Mr. Lereah says he decided he wanted to be an economist in high school. His first job was as an economics professor at Rutgers, then at the University of Virginia, and later as a regulator and economist at the Federal Deposit Insurance Corp.
Mr. Lereah says he was recruited to NAR in 2000 with an offer in the "healthy six figures." During the boom years, Mr. Lereah was eager to profit himself. He snapped up condos, including two in Washington in 2003 and 2004 and one each in Tampa, Richmond, Va., Alexandria, Va., and Naples, Fla. By 2006, he says, he owned six condos worth between $150,000 and $400,000 apiece.
In late 2005, the market began to fall, and in the third quarter of 2006 existing-home sales sank 12.7% from a year earlier. Mr. Lereah remained publicly upbeat, saying the market is "likely to pick up a bit" and arguing it was experiencing a "soft landing."
Soon, mainstream economists and the press were calling him out. "I thought it was criminal that he kept saying we'd reached bottom," says Ivy Zelman, former housing-market analyst at Credit Suisse and now head of her own housing-sector research firm. She says she dubbed Mr. Lereah "Mr. Liar-eah."
Mr. Lereah says he was starting to worry about the housing market and tried to tone down his optimistic comments with phrases like "we also may be seeing some fallout from a decline in subprime lending." He says his critics nevertheless "became vicious."
Mr. Lereah admits to one mistake: believing there would be no national housing crash. "I have to take the blame for that," he says. "I never thought it would be as bad as this."
In April 2007, Mr. Lereah left NAR, and after working about a year on a start-up venture, took some time off for a few months. He cruised around on his 29-foot sport-fishing boat and played golf at the country club. He eventually started consulting on the real-estate market again, this time to hedge funds and Japanese companies.
Mr. Lereah now works in a small upstairs office that doubles as an exercise room. He has started his own company, Reecon Advisors, that puts out a weekly newsletter on the housing market and provides consulting services. "I feel I have such a refreshing view now because I'm not representing any interests," says Mr. Lereah.
He charges $495 annually for the newsletter, and currently has fewer than 50 paying subscribers -- a number Mr. Lereah aims to increase to 1,500 by the end of this year.
"He's starting to make some money off it now, not much," says Mrs. Lereah. "We have an expensive lifestyle: a big house, a housekeeper once a week, college tuitions, the country club."
Mrs. Lereah, a CPA who also works at home, decided the only way she and her husband could work in the same house was if they pretended they were at outside offices. They communicate during the day by email and cellphone. Every morning, Mr. Lereah drives to a Dunkin' Donuts or McDonald's and eats in the car, just as he would have on his commute to NAR.
Mr. Lereah's real-estate portfolio has taken a hit. He says his 3,068-square-foot five-bedroom, 5½-bathroom brick house has lost about 20% of its value in the past two years. (It is worth $780,000 now, according to Zillow.com.) His condos are down, too. He now says housing prices won't recover for some time.
His successor at NAR, Lawrence Yun, however, says things might be looking up. In his latest news release, Mr. Yun says that although the pending home-sales index based on contracts signed in November fell 5.3 from a year earlier, with a "proper real-estate focused stimulus measure," home sales could rise more than expected, by more than 10%, to 5.5 million, in 2009.
http://online.wsj.com/article/SB123152099299568447.html
From The Wall Street Journal, Jan 2009:
Realtors' Former Top Economist Says Don't Blame the Messenger
By NANCY KEATES
FAIRFAX STATION, VA. -- On a recent weekday, David Lereah sat in the sunroom of his five-bedroom colonial house. The only sound was the yapping of his dog Maisy.
Once one of the world's most-visible housing experts, Mr. Lereah is disconnected from his old life. The former chief economist for the National Association of Realtors says the group's top executives won't return his phone calls. He says he wasn't invited to the association's 100th birthday bash last May.
Mr. Lereah, 55 years old, is one of many prognosticators who won professional accolades during the housing boom, only to see their reputations wither in the bust. Throughout 2005, when home prices in the U.S. hit their fifth consecutive annual record, Mr. Lereah was on television so often his wife, Wendy, would catch him by accident. He flew first-class to meetings and speeches in places like Hawaii and Aspen, Colo., staying in suites at expensive resorts. His bosses awarded him more responsibility. That year, he published his second book, "Are You Missing the Real Estate Boom?"
Mr. Lereah continued to make rosy statements amid growing signs of a housing downturn -- like this declaration in January 2007: "It appears we have established a bottom." A few months later, NAR announced that existing-home sales fell 2.6% in April from a month earlier and 10.7% from a year earlier.
Some critics pummeled Mr. Lereah for his optimism. Bloggers nicknamed him "Baghdad Dave," after the Iraqi information minister Mohammed al-Sahaf, called "Baghdad Bob," known for his pro-Iraq press briefings at the time of the U.S. invasion.
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.
A spokesman for NAR says Mr. Lereah used the same kind of forecasts in his book, which wasn't an NAR publication.
NAR, which represents half the 2.6 million licensed real-estate agents in the country, has its critics. One concern is that while the organization collects and releases objective data about home sales, it also provides commentary on those statistics -- and has a mission to advance its members.
Lawrence Roberts, author of "The Great Housing Bubble," says the Securities and Exchange Commission should regulate NAR the way it regulates financial advisers. "Realtors are currently able to make any statement they wish regarding the investment potential of real estate, no matter how ridiculous," he says.
"Realtors are the most trusted resource for real estate information," says the NAR spokesman in an email, adding that the group "has gathered the most comprehensive data on real estate in the world." The spokesman says that during his tenure Mr. Lereah was "solely responsible for the content of NAR forecasts and housing reports -- both the data and the interpretation."
Among the who's who of experts and policy wonks now accused of irrational sunniness are former Federal Reserve Chairman Alan Greenspan and Robert Toll, chairman and CEO of Toll Brothers. But Mr. Lereah has gotten more than his share of the finger-pointing in part because he was such a public face during the housing boom.
Raised in the suburb of Long Beach, N.Y., Mr. Lereah says he decided he wanted to be an economist in high school. His first job was as an economics professor at Rutgers, then at the University of Virginia, and later as a regulator and economist at the Federal Deposit Insurance Corp.
Mr. Lereah says he was recruited to NAR in 2000 with an offer in the "healthy six figures." During the boom years, Mr. Lereah was eager to profit himself. He snapped up condos, including two in Washington in 2003 and 2004 and one each in Tampa, Richmond, Va., Alexandria, Va., and Naples, Fla. By 2006, he says, he owned six condos worth between $150,000 and $400,000 apiece.
In late 2005, the market began to fall, and in the third quarter of 2006 existing-home sales sank 12.7% from a year earlier. Mr. Lereah remained publicly upbeat, saying the market is "likely to pick up a bit" and arguing it was experiencing a "soft landing."
Soon, mainstream economists and the press were calling him out. "I thought it was criminal that he kept saying we'd reached bottom," says Ivy Zelman, former housing-market analyst at Credit Suisse and now head of her own housing-sector research firm. She says she dubbed Mr. Lereah "Mr. Liar-eah."
Mr. Lereah says he was starting to worry about the housing market and tried to tone down his optimistic comments with phrases like "we also may be seeing some fallout from a decline in subprime lending." He says his critics nevertheless "became vicious."
Mr. Lereah admits to one mistake: believing there would be no national housing crash. "I have to take the blame for that," he says. "I never thought it would be as bad as this."
In April 2007, Mr. Lereah left NAR, and after working about a year on a start-up venture, took some time off for a few months. He cruised around on his 29-foot sport-fishing boat and played golf at the country club. He eventually started consulting on the real-estate market again, this time to hedge funds and Japanese companies.
Mr. Lereah now works in a small upstairs office that doubles as an exercise room. He has started his own company, Reecon Advisors, that puts out a weekly newsletter on the housing market and provides consulting services. "I feel I have such a refreshing view now because I'm not representing any interests," says Mr. Lereah.
He charges $495 annually for the newsletter, and currently has fewer than 50 paying subscribers -- a number Mr. Lereah aims to increase to 1,500 by the end of this year.
"He's starting to make some money off it now, not much," says Mrs. Lereah. "We have an expensive lifestyle: a big house, a housekeeper once a week, college tuitions, the country club."
Mrs. Lereah, a CPA who also works at home, decided the only way she and her husband could work in the same house was if they pretended they were at outside offices. They communicate during the day by email and cellphone. Every morning, Mr. Lereah drives to a Dunkin' Donuts or McDonald's and eats in the car, just as he would have on his commute to NAR.
Mr. Lereah's real-estate portfolio has taken a hit. He says his 3,068-square-foot five-bedroom, 5½-bathroom brick house has lost about 20% of its value in the past two years. (It is worth $780,000 now, according to Zillow.com.) His condos are down, too. He now says housing prices won't recover for some time.
His successor at NAR, Lawrence Yun, however, says things might be looking up. In his latest news release, Mr. Yun says that although the pending home-sales index based on contracts signed in November fell 5.3 from a year earlier, with a "proper real-estate focused stimulus measure," home sales could rise more than expected, by more than 10%, to 5.5 million, in 2009.
http://online.wsj.com/article/SB123152099299568447.html
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