Recovery In the Housing Market Does Not Mean Higher Prices: Is the Post Still Listening to David Lereah?

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Saturday, 03 September 2011 08:19

During the days when the housing bubble was inflating to ever more dangerous levels its main source on the housing market was David Lereah, the chief economist at the National Association of Realtors (NAR) and the author of the 2006 best-seller, Why the Real Estate Boom Will Not Bust and How You Can Profit From It. Remarkably, its main source now for the housing market is Lereah's replacement at the NAR, Lawrence Yun.

It seems that the Post still doesn't understand that there was a housing bubble. This means that prices fell from bubble-inflated levels and that they are not coming back. This is just like the NASDAQ which peaked at over 5000 in March of 2000. More than 10 year later it stands at less than half this level.

It's the same story with house prices. They peaked at levels that were more than 70 percent above their long-term trend. They still have not fully returned to their trend levels, having about 10 percent more to decline. There is absolutely zero reason to think that nationwide house prices will rise from current levels.

There continues to be an enormous excess supply of housing which can be most directly demonstrated by the fact that the housing vacancy rate remains near the record high set in 2010. There is nothing in the fundamentals of the supply and demand of the housing market that would indicate that we should expect house prices to rise from their long-term trend. 

This means that when the Post or anyone else refers to "speeding a housing recovery" in a way that implies higher prices, they are trying to tell you that they know nothing about the housing market.