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Home Publications Blogs Beat the Press The Washington Post Still Can't Find Anyone Who Knows About the Housing Market

The Washington Post Still Can't Find Anyone Who Knows About the Housing Market

Saturday, 24 August 2013 08:35

The Washington Post's housing reporting during the bubble years became world famous for its reliance on David Lereah as its main source for information on the housing market. Lereah, in addition to being the chief economist of the National Association of Realtors, was also the author of the 2006 best seller, Why the Real Estate Boom Will Not Bust and How You Can Profit From It. Somehow it never occurred to the great minds at the Washington Post that Lereah may have any motive other than dispensing information about the housing market.

Apparently the learning process is very slow over at Fox on 15th Street. Today's article on the sharp drop in new home sales in July prominently featured the views of Lawrence Yun, Lereah's successor at the National Association of Realtors. We also got wisdom from the chief economist of the National Association of Homebuilders, as well as the views of several people employed directly by builders. There is no source from outside of the industry.

Among the tidbits of knowledge that readers could not find elsewhere is the news that builders are struggling to keep up with demand. That tidbit comes to us courtesy of Mr. Yun, who according to the Post said, "the pace of building needs to be at least 50 percent faster than it is now to meet demand."

The piece continues:

"Builders say they’re trying to keep up. Economists expect that it will take two years for construction to get back to normal levels — about 1.2 million to 1.5 million homes per year. ...

"Builders are facing three issues borne of the housing crisis: a labor shortage, a dearth of available land and tighter lending standards."

There you have it, there is a shortage of construction workers. What happened to structural unemployment? Believers in structural unemployment would say things like the problem is that we have too many people who have skills as construction workers, but not enough who are trained to do X, where X is supposed to be an unidentified sector of the economy where we have a labor shortage.

Okay, this makes no sense. The idea that builders can't put up enough houses is ridiculous. There continues to be a far higher than normal number of vacant units, indicating that the market is still experiencing excess supply, not excess demand. Excess demand shows up in rising prices, just as shortages of labor show up in rising wages, something that we have not seen in the construction industry in recent years.

There was actually a very interesting story in the July new homes sales numbers. It is the first major data release that reveals the response of the housing markets to the recent jump in mortgage interest rates. New home sales measure contracts signed, most other housing data is based on completed sales. Since there is typically a 6-8 week gap between the signing of a contract and a closing, other data on the housing market are still giving us information about contracts that were signed before the jump in interest rates.

The July data indicate that the interest rate hike had a big effect on the market. Given the extraordinary rate of price increases that we had been seeing, which were threatening to push many markets back into bubble territory, this is clearly good news. But you wouldn't find anything about this issue in Jeff Bezos' newspaper.


Comments (6)Add Comment
Country's full.
written by LSTB, August 24, 2013 12:01
A "dearth of available land"? Are you kidding me?
The Washington Post Housing Stupidity
written by caseyf5, August 24, 2013 12:13

I am glad that the Washington Post uses such "unimpeachable sources" for their information. Whatever they publish I know that the opposite is most likely is the "TRUTH". Since they seem to enjoy "Bizarro World" way too much I can count on them for guidance. Think up is down, right is left, saying the housing market has a shortage when there are millions of homes that have been deliberately withheld off the market. lol
Since Dean mentioned Lereah's "Why the real estate boom will not bust"
written by John Wright, August 24, 2013 5:23
I enjoyed the reviews of this book on Amazon.

Unsurprisingly, there is one favorable review from David Berson, Chief Economist, Fannie Mae, "whether you agree with the author (as I do)"

But for amusement, read an April 19, 2005 review from NewYorkBuck in which he writes "Better Title - "Join the Greater Fools of America Club" and relates how "The author has a vested interest in the bubble not bursting, and he's selling his soul with this book to prove it."

Land is All Tied Up
written by Bart, August 24, 2013 8:25

LSTB: Builders are fighting the fracking industry for avaialble space.
Donkey of All Work
written by dilbert dogbert, August 24, 2013 8:34
As they say in Real Estate: Location Location Location
Even here in our rural neck of the woods, Auburn, Central California, sellers are getting multiple offers on non fixers. Seems some of the buying frenzy of the SF Bay Area has crept to the eastern foothills of the Central Valley Bible Belt.
written by watermelonpunch, August 26, 2013 8:36
I guess they're even going to try in northeastern Pennsylvania...
The guy interviewed is now focusing on starter homes. He must be hoping to sell them to all the "recent college graduates" that Dickson City Hyundai is advertising that they want to hire for sales positions on Indeed.com

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About Beat the Press

Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.