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THE "WIZARD OF OZ" AWARD.

THE "WIZARD OF OZ" AWARD.

Gene Wunderlich reports on the prognostications of Dr. Lawrence Yun, Chief Economist for the NAR.

At the NAR. Dr. Yun Prognosticates on Housing Recovery.

SO, Dr. Yun is one of the country's most "trusted" economists. I have a more apt award for Dr. Yun. If there were an award for the prognostications of Dr. Yun, it would have to be THE WIZARD OF OZ AWARD.

Like the wizard, Dr. Yun has a position of prominence due to the financial support of about 1.3 million hard working NAR members that makes his prognostications appear to be creditable.

However, once the curtain of obfuscation is drawn back, Dr. Yun, like the Wizard, will be exposed as a purveyor of "feel good" economic statistical manipulation.

SMOKE AND MIRRORS in the housing market analysis permits the prognosticators to focus on the increase in the simple numbers of homes sold. However, historical trends would be based on a comparison of a "greased" market with the market of a year ago - - before the tax credit (grease) was available. What a creditable prognosticator would demonstrate is the true cost to the economy of the actual cost of each sale that they can identify as the result of this stimulus, the tax credit.

Dr. Yun reports: "In fact, the credit is working better than first projected - it now looks like we'll have 2.3 to 2.4 million first-time buyers this year."

Again, I ask, "at what cost"? It would appear that the cost to the American public is about $18,400.000.000. Yes, that is $18.4 BILLION DOLLARS added to the American debt .

THE FARTHER IT GOES, THE LARGER IT GROWS. Dr. Yun's thinking or "rationalle for the tax credit" is, IMO, like a cascading snow ball on a Swiss mountainside. SOONER OR LATER, WE'LL BE BURIED IN DEFICIT, that is if we haven't already been so.

SOMETIMES IT ISN'T WHAT THEY SAY, BUT WHAT THEY DO NOT SAY.

PROMISES, PROMISES. Like the Wizard of Oz, the government promises to "help" the housing industry by "giving" first time home buyers an $8,000 incentive to buy a home. Will it help the housing industry?? Sure, for a short time. However, what happens when the government hand-outs end???

IS THE TAX CREDIT DOING ANYTHING TO HELP THE UNEMPLOYMENT RATE? Do I even need to answer that??

IS THE TAX CREDIT DOING ANYTHING TO REDUCE THE BUDGET DEFICIT? No need to answer that either.

IS THE TAX CREDIT INCREASING THE NUMBERS OF HOME BUYERS? It would appear so. However, how many of those first time home buyer simply moved their purchase dates forward from next year to this year?

DR. YUN SPECIALIZES IN "FEEL GOOD ECONOMIC PROGNOSTICATION" and that is not a long term cure for the housing market. National economic stability, high employment, rising earnings, higher take-home pay, low real estate taxes and more disposable income would surely do more and without increasing the debt.

WHAT ABOUT THE AMERICAN HOME OWNERS TRAPPED BY NEGATIVE EQUITY? Where do the 20,000,000 American home owners who lost all of their equity, their retirement nest egg, their financial future fit into Dr. Yun's economic prognostications???

Home Owners

"Honey, do you think we'll be able to move to a larger house before the baby comes?"

"No Dear, we owe about $300,000 more than what homes here are selling for. It will be many years before we can move to a larger home"

Courtesy, Lenn Harley, Broker, MD and VA, Homefinders.com, 800-711-7988.

Posted by Lenn Harley, Real Estate Broker, Maryland & Virginia on 11/14/2009 05:48 AM

Comments (31)

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31 Comments on THE "WIZARD OF OZ" AWARD.

NOV

"WHAT ABOUT THE AMERICAN HOME OWNERS TRAPPED BY NEGATIVE EQUITY? Where do the 20,000,000 American home owners who lost all of their equity, their retirement nest egg, their financial future fit into Dr. Yun's economic prognostications??? "

And I say AMEN! Makes you shake in your boots, it does! I see this problem everyday, all day and it is a choke hold on the economy.

Dick and Dixie. We're on the same page. Dr. Yun must believe that we all live in a cave.

I enjoy your HARD CORE Real Estate Talk. Sometimes, it's beyond what I can comprehend. But I like what you mentioned about some good questions you asked about the Tax Credit.

I, for one was in support of the tax credit extension. My philosophy, if the government wants to burn money, it's good to pour this into my industry since I do believe that Housing Recovery will help with the economy recovery.

However, at one point, I was willing to give up this Tax Credit if someone at Congress would look at providing a better job stability for Americans.

Down to a personal note, I'm going to capitalize on this tax credit, to serve my clients and in return, be handsomely returned for my hardwork. But guess what? I might pour some money back into the economy but eating out a little more just because I'm going to be working more, less time to cook. But other than buying some simple lifestyle conveniences, I don't plan to spend anymore money.

Why? Because the unemployment does look unstable. My dad taught me to make hay while the sun shine and I'm not even talking about hoarding money. I think you know what I mean.

So I'm in agreement with you. The Tax Credit would not stabilize the Job Stability that is on every American's mind. And when that doesnt happen, no one really wants to move up in housing but every renter now wants to take part in the tax credit.

Loreena. We are not in disagreement. I, too, capitalized on the tax credit to bring first time home buyers into the market. The agents in my network give good representation to first time home buyers and there's no need to turn them away simply because I don't believe that it's a long term positive for the economy.

That said, my post is really about Dr. Yun's continued projection of the image of a good real estate market when none exists and will not, IMO, for many years.

This year we have not focused on first time home buyers......but short sales. Trying to save their credit, so they can go back and purchase a home. This government is on a viral spin downward and the next generation will pay dearly for the mistakes they are currently making.

Kay. Agreed. Although, if smart economic planning were implemented, we could grow our way out of this morass quickly. I just don't see that for some years.

Lenn, just like the NAR's previous economist, you just have to remember who's paying his bills and the reports will be optimistic for his viewpoint. Unfortunately not just limited to the NAR bot many other advocacy groups. Whenever I read projections, study reports, etc, the first thing I try to find out is who paid for it.

With "giving" there is always a "giver"...but they do say it is better to give than to receive. Of course if you say something enough some will believe it!

Lenn,

Well it seems that many people out there are practicing "feel good" anything. If everything would be believed then it should be all coming up roses. Of course with all the smoke and mirrors it is hard to even read between the lines.

Len,

You have brought up some very interesting thoughts. I for one would like to see the forecasts with the real figures in them and the cause and effect over the next 10 to 20 years if the prognosticators can figure out that far and be real with them. They would, IMO, be depressing.

"WHAT ABOUT THE AMERICAN HOME OWNERS TRAPPED BY NEGATIVE EQUITY?"

To me, this is the question that is NEVER answered. People will continue to walk away when they realize they are so underwater. It can be a hopeless, debilitating feeling. I am about $100,000 underwater on an investment property that the renters aren't paying on. Now, do you think I am going to kill myself making that payment at the risk of my family's well-being? Even people with 800 FICOs and the best intentions need to make hard decisions. But nobody thought of that when appreciation was in the double digits and people were refinancing and selling like bandits.

I with you on the negative equity. I know you have written about it many times and I hope you continue. Maybe one day someone it get it..... But I'm not holding my breath.

Lenn: I'm with you. The more money we spend trying to stimulate a short term solution to make us feel good, the worse the inevitable crash.

Lenn....many of us have heroes. Some have folks that they wish to emulate.

Mr. Yun appears to have fallen for the style and substance of....

Bagdad Bob

I would have much preferred to see some more creative thinking, like a credit based on buying a short sale and saving homeowners from a foreclosure, if we are to throw public money at the housing problem. First time buyers are already stimulated by low prices, comparatively strong wages (for those able to find work, admittedly) and low interest rates. Why does this segment need more stimulation? With most buyers in my market picking the bones of the bank owned carcass, these purchases are one and done propositions. No move up (or even move down) purchases as a result of the first transaction. No help for the people trapped in negative equity hell. Given the often interminable waits and additional flaming hoops that buyers must jump through, a credit towards the purchase of a short sale could have encouraged the buyer to stick around to see the deal come to fruition rather than bailing after 3 months of non-response. More homeowners released from debtor's prison and in position to re-enter the market as consumers considerably sooner. I'd rather have all these people buying again in 2 years when their credit is back on track as opposed to 5 if they lose their house to foreclosure.

Not sure this would really accomplish much other than adding to the national debt, but any stimulus that would focus more on the underlying problems than just throwing money at people who are already prone to purchase without the added charity would be a step in the right direction.

Lenn:

Reading his "prognotistications" is not unlike getting accurate housing news from the media. Is it really all that different?

Jeff

Lenn,

NAR credits the 1st Time Buyer Tax Credit with truly creating only about 25% of the 1st time buyer activity.

In other words, the true cost of the credit is up to $32,000 for every sale created.

Ouch.

Lenn - while I agree that Yun is somewhat Pollyanish in his outlook (just compare what his prognostications were early summer 2008 compared to what really happenned), I am not in complete agreement with the rest of the post.

Senator Isakson, one of the author's of the home buyers tax credit, met with members of our local board of Realtors yesterday and we had a pretty candid discussion about the tax credit, health care legislation and other "stuff". While I have been against the extension, the senator made a pretty credible argument for the tax credit extension and expansion to repeat buyers. While I have not been able to coroborate this, he mentioned that the CBO scored the credit as resulting in a surplus of income, rather than a net cost to the government. Granted, a small surplus, compared to the big picture, of somewhat over $200 million.

But, he was very candid about a couple of things. Historically, economic recoveries have been led by housing market recoveries; jobs are needed to fuel those recoveries; until the health care and cap and tax legislations are resolved, there will be no real job recovery, businesses will not invest until they know what it will cost them; that dollars spent on home purchases cycle through the economy at a higher rate than dollars spent for any other purchases/program; home purchases, especially new construction, support a broad range of other industries.

Ultimately, though, he recognizes that without a broad based recovery, the tax credit, on it's own, is not a panacea.

But back to Dr. Yun, it appears that he drinks a similar elixer to Joe Biden that allows him to see things in a much rosier color. He does a diservice to us, and to our prospective clients, with overly positive projections. But then again, he is at the other end of the pendulum swing from most of the media.

Lenn - I love the Wizard of Oz comparison; it fits quite well. Your statement sums it up; DR. YUN SPECIALIZES IN "FEEL GOOD ECONOMIC PROGNOSTICATION"

I keep a file of Dr. Yun's projections as fodder for future posts, for he always exaggerates the positive.

Lenn ~ I agree with you, its just a temporary fix to a bigger problem with no easy solution. I don't think the people with negative equity will see their money back any time soon. They are forced to accept it and I am one of them people.

My big thing is CREATE JOBS! If they could make all the companies come back home and stop future companies from leaving this would help tremendously. But that will not happen either. Its a shame there is NO more trust in the near future for our great country.

Lenn - It seems that our association has fallen into enemy hands. It seems that they support everything the Obama administration wants to do, implying that all of us realtors do also. I believe that nothing could be farther from the truth. Most of us want an economic recovery that increase home ownership.

Increasing the deficit will insure that tax increases must happen (remember the Clinton era), causing small businesses to reduce expenses even farther, including job cuts. Most of us want our economy back. This is not the change that people thought they were voting for.

OUCH.......... you certainly tell it like it is, Lenn...........

I agree with you and Matt about what the government is doing to the economy....

I am afriad we are in the minority PLUS the elcted people are NOT listening to common sense...

=-/

Lenn- As always, you know your stuff when it comes to economics and calling the bull crap for what it is. No matter who or what does a study, it is always skewed to their benefit. It is like it all depends on whose glasses you are looking through.

But while Dr Yun is busy doing his la la land projections, the big bankers are still committing the largest fraud ever perpetrated on the American People and the government just rolls over to do their bidding, all the while, pretending they are not in bed together. Nothing can be further from the truth. So they pretend to do loan mods but won't reduce principle, pretend to be interested in doing short sales but then foreclose, pretend to be helping but then asking for billions more in bail out money and then starting the worst thing ever, the fannie mae leasing program so that the government can now become landlords. Very dangerous and you have to wonder where all of this is leading and why. Only then can we do something about it. I am still optimistic but it is going to take trust that we can make it without the Federal Reserve and that we need to allow large banks to fail.

“I believe that banking institutions are more dangerous to our liberties than standing armies. If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around [the banks] will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered. The issuing power should be taken from the banks and restored to the people, to whom it properly belongs.”

Thomas Jefferson

Lenn - just checking in from my cave - LOL. well not really. I too thoroughly enjoy your hard core RE talk. And on a sidenote we watched Wizard of Oz last night :) ~Rita

NAR's numbers and self serving projections are more obvious now than ever. I thought the government was bad with propaganda. NAR is just as bad. I believe their statements and projections this year and last were meant more to hold on to their base in membership. They really downplay any adjustments or revised figures. They have a lousy track record for forecasting.

Gabe. As always, follow the money, just like with politicians.

Gary. HA! When I read such prognostications, I figure they are giving something to the members all right. . .. . .

Larry. Numbers really don't lie. The truth is there is they look at ALL of the numbers.

Don. My goodness. I was out with a buyer today who asked me, "Lenn, what do you believe our housing market is going to be like in the next few years." I told him that I couldn't see the future. He's trying to figure about how long he's going to have to pay PMI. The best I could do for him is the fact that new construction in our area appreciates faster than resales once a community is built out. That is a fact.

Steve. That is always the unanswered question, isn't it. They won't touch it with a 10 fotter.

Mark. Yes, I do indeed write about negative equity and will continue to do so. I see the effect daily.

Chris. What I hate so much is the government picking and choosing the recipients of their largesse.

John M. That is very, very funny.

Paul. Tax credits for buying a short sale would have put the spotlight on the mess that is the short sale market. Brilliant idea. Sadly, I doubt that most legislators know what a short sale is or how complicated they can be. TOTOH, the virtual end of our move-up market has a negative effect on the housing market that few understand.

I love your ideas. Thanks.

Jeff. Of course not. The media gets their "news" from the NAR.

Mike J. "OUCH" is right.

Mike S. OF COURSE our economy is led by the housing industry. Of course it is and has been for many decades. Which is why the government action in giving Trillions to Wall Street and leaving home owners with negative equity "twisting in the wind" shows their callous disregard for the American citizen who don't have the PAC money to keep their palms greased. Stop me. Stop me.

John. Thanks. It seemed to make sense.

June. Jobs, indeed. Even then, the unemployed will not jump right into the housing market.

Elizabeth. There is not one little corner of the economy that the government will not tax now. They are slapping taxes across the board. It's got a long way to go.

Alexander. Sadly, move folks want to hear only good news or what purports to be good news.

Katerina. When I see what the banks are doing today, I realize again and again just how totally corrupt the government is.

Rita. I saw a half minute of it while flipping channels. The Wizard had nothing on the NAR.

Jim. Sad isn't it. In their quest for membership, I fear that they sold their soul.

Lenn - This is precisely why I so diligently try to educate people about our local market. If you want to know what's going on locally you watch the local news. National news - no matter the source - is nothing but political spin... and right now it's turning into a whirlpool in a toilet.

Jim- I so agree with you, always have! There are many small brokers here that still refuse to join NAR and I give them kudos for being able to run their business. I have coached several agents around the country who did not belong to NAR and they did just fine. I have said for years that NAR is such a political machine with no regard to their members who pay their paychecks, akin to AARP who is selling out their members in order to make more money off of them through selling GAP insurance to their members after the government fulfills their promise to AARP to get rid of seniors supplemental medicaid insurance. These boards and member companies need to get a clue who they are supposed to be working for. Katerina

NOV

Lenn, I appreciate your no nonsense look at what is going on. You make a persuasive argument. I believe that taxes will be going up dramatically in the not so distant future.

Katerina -

Sure do agree with you about AARP. It's just a big insurance company.

Lenn and others-

Sure do agree with you about NAR(....and even our local MLS data reports).

But the tax credit has helped arrest the fall in home prices.

That is crucial: especially to solving NEGATIVE EQUITY -- an all the harm it has been doing.

Employment always lags coming out of a recession. It will this time, too.

Jim. I'm not sure there is empirical evidence that the tax credit helped arrest the fall in home prices. I believe that interest rates are the proximate cause. For that, there is empirical and historical evidence that housing traffic follows interest rates in lock step.

Theodora. So so I. So do I. Sadly, the increased taxes will go to support government with reduced services, not real value to the tax payer.

Christianne. News is so transient. I prefer to look at hard data. I can come to my own conclusions.

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