I believe that the NAR ads put us at risk.  We're touting real estate as an investment.  They mention that real estate values double every 10 years.  Problem is, few buyer ever own their homes for ten years.  The average around here is 2.5 years.  Nationally it's about 7 years. 

What I fear is that buyers will begin to expect agents to provide projected appreciation values, compare investment potential of one property over another, or "find the best investment". 

Few agents are capable of doing this, but that won't stop them from trying.  In our market, an agent who sells investment value is just staking themselves out for several years. 

I believe that the NAR could, for once, advertise some of the services we help buyers and sellers with to get to settlement, among other things. 

Lenn, Both of us have been around for a while. The NAR has run those kinds of ads. Right now we need to change the "national consensus" that real estate is not a good investment because I believe that it is a good investment. But it has to be a long term hold.

We used to teach (our clients) that they had to be in a house for about 5 years to come out OK. Any less time then they would probably lose money (transaction costs). I think we need to go back to that model.

Bill Roberts

Good job, William

And by the way, I think it's time for the old-time Realtors to take back the NAR.  I'm up to here with their nonsense.  And one more thing while we're at it.  I'd like to know what each of those managing officers make in salary, etc.

Your friend,

Bill

Bill, the problem with NAR's faith based approach to economics is that NAR has been beating the same drum for two years to no avail.  If positive spin was enough to bring the tide in, NAR would have brought the tide in last year with pronouncements like these during 2006:

January 10, 2006 - The key word for the housing market in 2006 is balance, with a return to a more normal rate of price growth, according to the National Association of Realtors®.

April 11, 2006 - Home sales should generally level-out and remain at historically high levels, according to the National Association of Realtors®.

October 02, 2006 - Pending home sales are up, indicating a stabilization is taking place in the housing market, according to the National Association of Realtors®.

November 03, 2006 - In a full-page newspaper advertisement running in six of the nation's leading newspapers beginning today, the leadership of the National Association of Realtors® is launching a national campaign to urge home buyers who have been waiting to buy the home of their dreams to act now before the market changes.

And then there was this item, which raises serious doubts about the credibility of NAR's press releases:

September 13, 2006 - Housing prices are expected to continue to have a limited fall throughout 2006, according to testimony submitted by the National Association of Realtors® at today's Senate Banking Committee hearing on the economy. In addition, NAR noted that the sellers' market is transitioning to a buyers' market, which can be healthy for some local economies.

Please note that this item "housing prices are expected to continue to have a limited fall" occurred in the midst of the positive spin.  A few months earlier NAR claimed the market would "level out" and a month later they claimed the market had stabilized.  What was different about September?  NAR was under oath.

NAR has a massive PR problem because their story changed dramatically based on being under oath.  For all the complaints about negative press, the mainstream media has been very charitable by not dragging out old quotes to make NAR look like they were attempting to defraud consumers by making false claims.

Unfortunately we are going through a unique economic contraction as we shift from a manufacturing economy to a service economy.  Home purchase prices need to adjust downward (like the prices of goods at Walmart) to reflect our lower real incomes.  Positive spin won't close the massive gap between the cost to rent and the cost to buy, nor will it raise our real incomes to make the ownership premium affordable.

As the old saying goes, "price is the problem that cures most other problems in real estate."  The number of transactions is way down.  Basic economics tells us that means prices are higher than the market will bear.  If prices come down, the number of transactions will increase.  We should be arguing for a price correction rather than trying to convince sellers to hold the line on high prices because the market is stabilizing.

Do we want to sell houses?  If so, we have to convince sellers to fix their prices.  Price is the problem.

Frank Jewett

Bill, It really doesn't matter if NARs ad campaign "It's a great time to buy or sell real estate" is true or not. That's not the point. The point is is comes off, to the consumer, as the same old propaganda. I've written 2 posts about this now and the comments always get back to "Well it's a great time to buy in my area" Either folks truly just don't get it or they are choosing not to. These NAR ads make us look like idiots and NO ONE is buying it.

It's not about the market it's about the ad. I don't need to know economics to figure that out. Do you really feel this ad campaign will turn the market around? Aren't there other ways to market positive information with out throwing out propaganda? Why not design a campaign around the value REALTORS(R) provide?

Bill:   Your post is eye-opening and provocative.  I really enjoyed the quotes added by Frank and the last comment by Bryant.  You're right on point Bryant... they should focus on the value-added benefits of Realtors.  There are too many folks out there (Sellers and Buyers) losing out on the advantages of having Realtors in the ballgame.  I see it all the time. 

The Value of Realtors...

Now there's a novel idea for an ad campaign :) 

TLW...ROAR!

Bill Cherry, I'm all for a coup. Thank you.

Frank Jewett, There are two separate issues here. One is what "drives" markets and the other is that the staffers at the NAR are out of touch with the membership.

I want to change the perception that prices must go lower. I don't believe it. And your argument that we need to achieve affordibility just doesn't sync with reality or history. Land prices have always stayed just a little (sometimes a lot) above the affordibility threshhold. It has to do with future expectations.

I like NAR's ad campaign. They are sending the right message. I don't like their apparent disconnect with the membership.

BB, I know you have written those posrs. It is because of those posts that I wrote this. We need some balance here against your campaign for lower prices. You've been advocating for lower prices for some time. I'm opposed to that. The psychology of economics is very delicate. A run on a bank can be started by no more than a rumor. Sell offs on Wall Street can be started by mistake. We are on the verge of a really bad recession if we are not careful.

Rich, You are new to the game so you probably don't remember the "value added" ads of the past. I'm not against those ads, but right now we have a bigger problem. Nuyers are staying away. It is an issue of using a Realtor vs using a non=Realtor. They are using anybody.

Thank you all for commenting.

Bill Roberts

Bill, according to an article in Fortune magazine, the price-to-rent ratio is well above normal.

Frank, even if that is so it only means that rents are lagging. They are going up steadily and quickly. Statistics can be used on all sides of an argument.

Bill Roberts

Bill, Are you sure you are really reading my posts? "A campaign for lower prices" has nothing to do with anything I have ever written. Now I have written the FACT that I am in a declining market and that it's my opinon they will continue to decline(in Poinciana Fl). Not sure how this can be construed as a "campaign for lower prices".

REALTORS(R) do not control market prices. And NAR's ad campaign will not bring buyers back into the market. I would say "we will just have to agree to disagree" but the problem is we are not even talking about the same topic. I'm talking foolish advertising and your talking economics.

BB, Yes. I read, not skim your posts and ALL the comments. There is a lot of good stuff there. You said last year that prices still needed to come down some more. I took that to mean you wanted them to come down some more. I will concede that you could have meant that they probably would come down some more. The English language as you and I speak it is not very precise.

Bill Roberts

Bill, Well here's something we can certainly agree on "The English language as you and I speak it is not very precise." I speak Southern :)

BB, I've noticed that you do when it suits you. You also speak yankee when it suits you, Please notice that I didn't capitalize that.

Bill Roberts

Bill:  What I hate about NAR's ad is that it will provide links to portions of the realtor.org site that will guide viewers in accessing housing and community research or to identify an appropriate real estate agent.  I have never thought that I have received the leads from NAR that I should have received.  Now they are going to try to do the agent's job in housing and community research.  What's that all about.  Are they going to eventually become like "zillow"?  

I do believe home prices are going to continue to decline... for how long I don't know.  It's the market and there's not a thing we can do about it.   It's like the stock market... if the Fed Chairman get's the flu, the market will go down.  You are right that the markets are more psychological rather than logical... and I'm thinking we are in a psycho market.  I'm getting one low offer after another... and, I'm seeing a trend that I don't particularly like since I'm representing the seller.  But, at least I'm getting some offers.

Homes have historically been a good investment.  If they don't do something about the economy and the decline of the dollar, we may see a reverse trend for the short term.  Then, one must define short-term.  

Jan, No matter what, the long term prognosis is good. Set an example, buy something and then tell everybody why you bought. We CAN turn this around.

Bill Roberts

Jan, REALTOR.com will try to become "like Zillow" because that is what the consumer wants.  Organized real estate lost the initiative because they were arrogant and complacent.  Now they are frantically trying to copy the innovators to regain control of the process.

Bill, I agree with you that rising tides lift boats, but I don't think NAR's campaign has that kind of rising power.  I want the tide to come back in as well, but there are factors at work in the market that are anything but physiological.  Once those are dealt with, the market will respond by moving forward.  NAR pushing the same old buy, buy, buy message is simply disingenuous.... buyers are not that gullible.

Jesse or Kathy, I don't think it is a matter of being gullible. Attitude is the issue. I think we need to change our attitude if we want the buyers to come back. As long as we "project" a negative image, they won't buy. The National Association of Realtors acknowledges this dynamic. They are trying to do what they can, but the attitude of individual members is working against all their efforts.

Bill Roberts

Hi, Bill - I do think perception has something to do with why some markets are under-performing when conditions don't necessarily warrant.  I guess my issue with the campaign is that it could have been made to focus attention to local markets rather than issuing a blanket statement to buy.  Personally I think blanket statements damages their credibility just as blanket statements from the media saying the market is crashing damages theirs.  Jesse

Jesse or Kathy, You're probably right. I guess I gotta do this all alone.

Bill Roberts

Oh, no.  We're doing our part to boost confidence in the market.   Our upper end market has taken a big hit, so it's a great move up market here... even our median market has a number of good values that buyers would be smart to snap up.  Jesse

Jesse, That's the right attitude. Glad to see it.

Bill Roberts