Cheapest Homes in 40 Years? Not Even Close…
Cheapest Homes in 40 Years? Not Even Close…
I have been wanting to discuss a horrifically misleading article for a week now: Americans Shun Cheapest Homes in 40 Years as Ownership Fades.
It is an object lesson in how an industry spokesgroup, engaging in biased analysis, used poor econometric models to create misleading data. That led to others making bad assumptions based on that data, which in turn leads to an unsupported conclusions. To wit, that home prices are now cheap (they are not) and home ownership is being shunned (it is not). Thus, the end result is a misleading Bloomberg.com article on residential Real Estate that is unfortunately based on these terribly flawed NAR metrics.
The reality is quite different than the spin. No, it is not, as objective data reveals, especially cheap.
This flawed data/PR flack/spin approach is how the NAR manages to get a false and misleading claims printed in major US media on an all too regular basis. “The most affordable real estate in a generation” nonsense in Bloomberg is only the latest hoodwinking they have pulled on journalists. Recall back in 2009, the Wall Street Journal and IBD were both snookered by the NAR’s seasonal adjustments (we discussed this here, here, here, and here).
Given the NAR’s track record when it comes to data analysis, anyone who makes any sort of purchase based on NAR spin is a fool who will get what they deserve.
All of this leads to our present discussion of Home Affordability. Back in 2008, I wrote an analysis of the Realtors’ model titled “NAR Housing Affordability Index is Worthless.” As you can see from the chart below, during the entire boom period of 1996-2006, there was but ONE MONTH where the NAR index said homes were not affordable. Indeed, that chart period extends from 1985 to 2008 — there was but a single month of over-priced houses.
How on earth did home prices NEVER become UNaffordable during the greatest run up in housing prices ever in the United States history? What sort of model refuses to allow homes to ever be perceived as unaffordable? We could only get that sort of thing from an industry source.
What? The NAR making things up? Providing skewed and biased information that might lead people to be interested in buying real estate?
That’s impossible!
But, if you do think it’s possible – check out the full article.
That said, I’m not sure why this matters…. isn’t unaffordability a sign of good financial health? I seem to recall that everyone was a lot happier back in 2006 when housing was unaffordable. Therefore, there’s only one way to restore happiness in America…
May 8th, 2011 at 12:30 pm
Nice to see you around, burbed. Excellent article.
May 8th, 2011 at 7:34 pm
No one ever would have suspected NAR would invent a useless index that
neveralmost never shows that now isn’t the right time to buy. It’s almost as if they care more about generating commissions than helping people!May 9th, 2011 at 8:49 am
I’m tired of all the negativity. Bring back the good times!
Bring back the liar, no document loans! Bring back the housing ATM.
Let the good times roll!
May 9th, 2011 at 9:08 pm
Seriously Alex, would that we could. I knew it was a bubble – really, since the 70s I knew that we were building on air – but it allowed people to have functional lives. that is, people who are not fully functional in a real economy. like my cousin, who in the bubble went to college (first in her part of the family), bought a Curves francise, and ran it for a couple of years on sheer, exuberant debt, w/o even know ing she was running it on debt. now of course her Curves is bankrupt, and her costly car has been repossessed (she still has a clunker), and her kids are worried that they might be homeless (which won’t happen; there are lots of spare rooms in their relatives’ houses in the CT hinterland and no-one starved in CT even in the first Depression).
but it’s *horrible*. multiply her family by a zillion (her husband has a state job as an engineer but has serious health problems), and that’s the country going forward for at least a decade. she works hard, is irrationally enthusiastic (read: not depressed), likes to spend; she was *born* for a bubble. she rode it up! she even got a job interview out here at Google recently, for a long-distance position (pretty good for a 47 y.o.). but it is *all* *over*. next serious bubble won’t come until you’re old, Alex. start being frugal; it’ll be the new normal for a long, long time. bleagh.
May 10th, 2011 at 10:22 am
Woot… Austerity. It’s good for the soul.
May 10th, 2011 at 10:30 am
“start being frugal; it’ll be the new normal for a long, long time. bleagh.”
Talk about a negative feedback loop.
How many divorces can be directly attributed to a lack of housing price appreciation?
May 10th, 2011 at 10:57 am
Here’s more fuel for the fire – foreclosures a crushing house prices:
http://money.cnn.com/2011/05/09/real_estate/metro_home_prices/?section=money_latest
The silver lining? San Jose has the second highest median home price behind Honolulu.
May 10th, 2011 at 11:20 am
“The lowest priced markets were in the Rust-Belt: Youngstown, Ohio ($55,400); Lansing, Mich. ($64,400); and Toledo, Ohio ($64,900).”
Lowest to highest is a factor of 10…