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NAR says housing is in a recovery period, we strongly disagree

Hitting the bottom

We are not economists although we closely monitor and study the national real estate economy for hours every day, pouring over statistics and piecing together a picture of health (or lack thereof) in the real estate sector. We report on dozens of metrics that give us a pulse on housing, and we’ve been reporting for a long time that real estate has not quite hit the bottom… yet.

So that is where we are right now and most economists agree. But the problem with economists is that there is rarely a strong consensus about what the future of the economy is, and often the present and the future intersect, so we are all left to choose an economist’s theory that most closely matches what our reality is; there’s no other way. It’s like choosing a horse in a race- you can’t pick “all horses” and feel like a winner when one of them wins (or when one economist is right).

The economist we most closely follow and have mentioned for years is Dr. Mark Dotzour, Chief Economist at the Texas Real Estate Center. In 2008, we wrote, “National commercial developers considering projects in Texas often attend Dr. Dotzour’s forecast meetings before making a decision on their billion dollar deals, I kid you not. Even the most pessimistic, the most well educated, and the most experienced still look to Dr. Dotzour who seems to be the only one with a crystal ball.”

We noted he is “the model which all economists on the national and local levels should emulate. Dr. Dotzour has never been overly optimistic nor overly panicked and he has been right on the money for as long as I can recall as he forecasts locally and nationally (many of his speeches are available here as proof).”

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Have we started recovering yet?

Dr. Dotzour said recently at the SIOR Conference, that there was no double dip, and that we haven’t even hit the bottom yet. We noted that “this conflicts with what many other economists are saying and honestly, it conflicts with what we have been saying. We’ve even shown you via chart where the double dip exists. But when Dr. Dotzour says these up and downs don’t account for the bottom yet, we are a bit afraid of what the bottom looks like.”

Dr. Dotzour said, ““The government sector has postponed right-sizing at enormous expense to the American taxpayers” and alludes to “unfathomable budget deficits” holding the economy back.

What is NAR’s position?

The National Association of Realtors takes a different stance and we are shocked given Yun’s typically conservative and realistic outlook unlike his predecessor. NAR’s Director of Quantitative Research, Jed Smith told a San Antonio newspaper this week, “The good news is we’re in a recovery. I have to tell you that because otherwise you wouldn’t know.

We’re not economists, and he could be seeing something we’re not, but honestly, we could not disagree more strongly. Maybe we have hit bottom and Dr. Dotzour is wrong, but we most certainly are NOT in a recovery. Here is a short list of just a few of the many, many reasons that housing is not recovering yet. It could come soon, but we do not believe it will be in 2011 or maybe not even in 2012.

Reasons housing is NOT yet in a recovery period

Despite our finding Smith’s commentary to be either snide or condescending (it’s hard without voice inflections to tell) as he notes “otherwise you wouldn’t know” we are in a recovery unless he told you directly, we would like to point out reasons that we strongly disagree with his assessment of the real estate economy:

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  1. Unemployment, unemployment, unemployment. We’ve been saying for years that without healthy employment, there cannot be healthy housing, so until the government stops patting themselves on the back and realize that unemployment is horrible and underemployment is worse, we won’t see a recovery in years. This alone points to a lack of recovery right now.
  2. The current foreclosure backlog could take decades to process. The robosigning scandal where banks used software rather than people to process foreclosures, leading to illegal foreclosures (on wrong addresses or illegally against soldiers, etc.) and ultimately to dozens of lawsuits against the banks plus state and federal agencies investigating and punishing banks for their misdeeds which has led to mortgage processor layoffs and a foreclosure freeze/slowing be it voluntary or involuntary by banks.
  3. Homeowners are not only struggling because of underemployment, unemployment and a general spike in living costs, their biggest investment (their home) has dropped nationally to the lowest values in nine years. Ouch. Home values is where economists point to our current double dip in the recession which is NOT synonymous with a recovery.
  4. The most current data (from NAR, nonetheless) notes that existing home sales have dropped almost 4% nationally in May alone and we’re now in a double digit drop from 2010.
  5. Pending home sales data from last month which shows the number of contracts signed has plummeted 30% since 2010, a dismal number at best. This does not show consumer confidence (which remains shaken at best) in housing. If no one is able to qualify for a loan and offers are down, make no mistake- that spells trouble, not recovery.
  6. New home construction is a disaster and is barely limping along. Although we just reported that new home sales dipped for yet another month in a row by 2.1%, we saw the silver lining in that sales were up 13.5% from 2010 (a year that was even worse than 2011 for builders). Lending is near impossible for small builders and a struggle for even the biggest builders leaving tight inventory which would seem to be a positive that buyers could feel compelled to buy because of the rare nature, but even builders are pessimistic about the rest of this year. Housing permits (a predictor of future building) nudged up a bit recently but overall have faceplanted and done even worse than economists expected. New construction is a tremendous drag on the housing economy.
  7. Supply and demand are off. Based on a comparison of housing preferences, America has too many big-lot housing and not enough small-lot and attached housing. Supply and demand are officially off. This could damage the suburbs with big lots even more substantially than the hit in high foreclosures, inventory gluts and the like.
  8. FHA premiums rose and FHA purchase applications TANKED. If we were in a recovery period and thinks were hunky dory, a premium increase wouldn’t threaten to agitate the market, it would make a small dent and move on, but in this case, FHA apps are lower this year than last.
  9. People are scared. The government is talking about mandating 20% down on all mortgage loans which some say will destroy the ability for most to buy (which NAR agrees with). Because this is unresolved, we remain in a state of limbo- at the current poor state of housing, the economy is struggling, but throw in this grenade and it could sink the whole ship. 20% down wouldn’t destroy a sector in recovery, but it would destroy a sector in decline that hasn’t quite hit bottom.

We could continue, but you get the point- WE ARE NOT IN A RECOVERY PERIOD in housing. It’s not all doom and gloom as this too shall pass, but we cannot agree with a NAR economist whose statements aren’t even in line with their Chief Economist’s recent statements.

We don’t need to be told we’re in a recovery, that simply comes across as cheerleading in a moment in history when we know that we need to brace for hitting bottom, not put on rosy glasses and hope for the best (which echoes of one NAR Economist of the past that has since been skewered for this very reason). Realtors are in for a tough 2011 and possibly 2012, but when a recovery is upon us, we will tell you, because we are hoping like crazy that it comes sooner than later- housing could really use a lifeline.

Lani is the COO and News Director at The American Genius, has co-authored a book, co-founded BASHH, Austin Digital Jobs, Remote Digital Jobs, and is a seasoned business writer and editorialist with a penchant for the irreverent.



  1. BawldGuy

    June 24, 2011 at 2:00 am

    Lani — It doesn't much matter who's the economist on stage for NAR. Mr. Yun was the exception to the rule, but in my opinion was made to look even more conservative than he actually was by virtue of who came before him, and now, apparently, who followed. They're mouthpieces for a group who prospers when times are good, or when recessions are morphing into 'recoveries'. If the facts don't fit their agenda, guess which one gets a makeover?

    This reminds me, (and gives me the creeps a bit) of both 1984, and Atlas Shrugged. Plain talk is the first casualty of duplicity. Words don't have meaning. This is how an economist can, with a straight face, say that we're in a recovery when the unemployment just rose — again — while housing values across the board were simultaneously falling — still.

    The fact that anyone pays attention to anything NAR says/writes about the economy is an indictment on learning curves everywhere. Either that, or, when Russell Shaw said, "There are some things so simple even a Realtor could do it", he was stretching the concept of 'giving the benefit of the doubt' to the breaking point.

  2. Sig Buster, III

    June 24, 2011 at 7:05 am

    I agree with the 9 reasons you listed for saying "We are not in a recovery period". I also agree that these are only some of the reasons we are not in a recovery. A recovery may appear to be happening in some areas, but certainly not overall, and clearly there is no real momentum.

    I listen to "economist" with some amusement because they all have the same statistics, yet most of them have different conclusions and opinions of what the statistics mean. None of the "economist" are making a living on the street selling real estate. Therefore, I don't think they have a clue as to what is really happening on the street. Every Realtor I talk to tells me the same thing when I ask them "how's business"? "It sucks"! is the answer most given, and the most polite answer I receive.

    So what is the root cause of these problems? I think the answer is GOVERNMENT. They have finally regulated us out of business. They have hurt us directly with the evil DOJ but by taking over the banks they have about finished us off. Or so it seems by reading your list. This has happened in spite of the false spin NAR has fed us over the years about how they have acted in our favor. NAR has lost many fights and won only a few in Washington. They are anemic at best. I have earned the right to say this because I've been there and watched them operate.

    There seems to be a direct disconnect between "The Powers that Be" within NAR and the Realtors on the street. When NAR decides to listen and actually act on what the members are telling them, then and only then will we Realtors, As a group, be able to change things in Washington. Only then will we be able to throw off the yoke of GOVERNMENT and get this country moving again.

    Sadly, this seems a long way off. "The Powers That Be" within NAR have signaled to us and rammed down our throats that raising dues for political purposes and thereby throwing more money at the problem will surely deliver us from the strangle hold of GOVERNMENT.
    Yeah! Now why didn't I think of that?

  3. Joe Loomer

    June 24, 2011 at 9:46 am

    I'm disgusted that an organization that just hiked my dues in order to push for more stimulus in the housing market will flat out lie to the American people. Even the best selling county in my area has seen significant losses in value – and we never had the hyper-inflation in home prices experienced elsewhere. May sales were the lowest in MLS records for that month.

    Navy Chief, Navy Pride

  4. Benn Rosales

    June 24, 2011 at 9:54 am

    The word recovery is subjective for the most part however, if translated to human condition one could argue housing is stabilized. If nothing good and or really bad is happening then one could say it's resting comfortably with a good prognosis with plenty of rest and by meeting certain conditions over time. I understand (I think) what NAR is saying and could be chalked up to a democratic (wishful thinking) talking point.

    It's a talking because if the budget isn't cut capped and controlled housing will flatline – end of story. That doesn't spell reelection for any of NAR's friends in DC or around the country.

  5. Mark Brian

    June 24, 2011 at 12:59 pm

    I guess it all depends on how you define "recovery". I am not seeing a recovery right now or feeling it. Sure, for some the opportunities are out there in the real estate market. But for most Americans, times are still tough and they are worried.

  6. Michael Hon

    June 24, 2011 at 3:45 pm

    You are right on the money! The word recovery is subjective for the most part however, if translated to human condition one could argue housing is stabilized. If nothing good and or really bad is happening then one could say it’s resting comfortably with a good prognosis with plenty of rest and by meeting certain conditions over time.

  7. John Slocum

    June 25, 2011 at 8:59 am

    In our local Vancouver WA market, the level of Demand dropped 20% a year ago with the expiry of the Tax Credit program, and showed relative support at the newer, lower level. From a "technical market" perspective, the 3-month rolling average for Demand finally turned north two months ago, piercing the longer-term 12-month rolling average for Demand. This up-tick in demand has also been sufficient enough to cause the 12-month trend line to point in a positive direction. In my opinion, if the politicians will keep their feet off both the brakes and the gas pedal, this local market my go from the verge-of-recovery on to Recovery.

  8. sfvrealestate

    June 27, 2011 at 6:19 pm

    Did Yun quote any statistics? I'm curious.

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