Home sales are down a long ways. But why?
Sales of existing homes *plunged in March by the largest amount in nearly two decades*, reflecting *bad weather* and increasing problems in the subprime mortgage market, a real estate trade group reported today. … David Lereah, chief economist at the Realtors, attributed the big drop in part to *bad weather in February*, which *discouraged shoppers* and meant that sales that closed in March would be lower. … There was weakness in every part of the country in March. Sales fell by 10.9 percent in the Midwest. They were down 9.1 percent in the West, 8.2 percent in the Northeast and 6.2 percent in the South.
Clearly, the 9.1 percent sales drop in the West is directly attributable to the weather. Here in Arizona, it’s been a brutal mid-70s and sunny for about two months now. I can’t speak to the devastating effects of the moderate early morning shower we had last Saturday here in Tucson, though. The fact that the drop in the West was one percentage point larger than the drop in the Northeast is also obviously weather-related. The guys who get quoted in reports like this should just own up and change their job title from “Chief Economist” to “Chief Shaman for Rationalizing the Juju.”
{ 31 comments }
Rich B. 04.24.07 at 6:32 pm
Kieran is obviously a newbie to home-sales blogging, because if not he would know that David Lereah is not one of “the guys who get quoted.” He is THE guy.
Just google his name. Link #1 is the “David Lereah Watch” blog. Link #2 is his Wikipedia page, currently beginning, “David Lereah is a paid shill for the National Association of Realtors (NAR).” There is no warning on the Wiki page that “the impartiality of this article has been questioned.” “Paid shill” is simply an empirical fact. Liar would work, too.
I mean, the guy’s just doing his job, I guess. I have no idea why anyone quotes him, though.
Kieran Healy 04.24.07 at 6:34 pm
Ha! OK, “Chief Shill for Rationalizing the Juju” then.
Stuart 04.24.07 at 6:47 pm
Of course if you read the statement in detail it is all technically true no doubt, but the way it is written tries to give a different impression of the situation. For example “attributed the big drop in part to bad weather”, of course in part could be 50%, 99%, 1% or even much smaller than 1%. So as long as the weather can be presumed to have any non zero effect on sales, then the statement is true, if misleading.
DaveW 04.24.07 at 6:51 pm
That would be redundant.
Barry 04.24.07 at 7:16 pm
Somebody once said that market writing was based on seeing if the market was up or down, and then pulling the latest item of good/bad news off of the ticker, and crediting/blaming the market’s move on that.
Somebody seems to be proven more correct every day.
harry b 04.24.07 at 7:17 pm
So why does he get quoted? Or at least, without a qualifier. Is there a journalist who can explain this? Could Kieran set himself as Chief Economist and Spokesperson for the National Association of Non-Realtors? I’d join.
MikeJ 04.24.07 at 7:32 pm
There are real differences between shamans and economists. Shamans attempt to find past patterns of activity to project the future (e.g. a comet comes before death of a king, watch out next time). With an imperfect understanding of natural processes, they often make very natural mistakes with correlation and causation.
Economists usually just make shit up.
joel hanes 04.24.07 at 7:43 pm
Another case where telling the truth would be a career-threatening move. Lereah is unable to say “existing home sales fell again because buyers have concluded that housing is overpriced, and are waiting for the inevitable correction” because Lereah’s job is not to present facts, but rather to present _marketing_.
dsquared 04.24.07 at 7:48 pm
Strangely enough I have never once seen any company give credit for a good set of numbers to unusually favourable weather.
perianwyr 04.24.07 at 7:53 pm
David Lereah, chief economist at the Realtors, attributed the big drop in part to bad weather in February, which discouraged shoppers and meant that sales that closed in March would be lower. Existing home sales are counted when the sales are closed.
In other words, this is a testable phenomenon, to an extent. It seems that reports lag one month, so that means a two-month lead time for reporting. In essence, if the effect of weather on home buying is to be believed, we should see a small jump in home buying with the next report, commensurate with the weather effect. After all, people do not abandon their plans to buy housing due to temporary bad weather. A house is not a purse or a hat, so the people put off by the weather should be back around to check out houses soon.
So, we’ll see next month.
Rich B. 04.24.07 at 7:54 pm
Lereah gets quoted because back in the days of yore (until last year), he made increasingly ridiculous predictions about the housing market that turned out to be exactly right.
Ten experts would say, “There’s no way the housing market can rise 25% again!” and Lereah would say, “The housing market will rise by at least 25% again!” and at the end of the year housing prices were up 30% and Lereah was right and 10 experts were wrong.
And then next year the same thing would happen. I mean, heck, when I bought my house (2002), most experts were saying we were at or near the top of the bubble, and Lereah said we’d keep go-go-going. I bought gritting my teeth hoping we wouldn’t have to move soon because I was sure property values were about the plummet.
Now, of course Lereah was as much a paid shill when he was right and he was when he was wrong, and he didn’t know what the heck he was talking about any more than Mr. “Dow 30,000” did back in 1999 — or really any more than the other experts who predicted that the bubble would DEFINITELY burst in 2003 . . . 2004 . . . 2005, but the fact is that for the past 5+ years, he was right and everyone else was wrong. That gives him at least facial credibility, because to deny him that credibility undermines the media’s whole “prognosticator” angle.
If you are going to sit down and ask “experts” what they think, then you’ve got to give credit to the experts who turn out to be right, even if the expert is a computer programmed only to repeatedly call “heads,” and you just flipped heads ten times in a row.
perianwyr 04.24.07 at 7:57 pm
Strangely enough I have never once seen any company give credit for a good set of numbers to unusually favourable weather.
What about reports on home construction? I’ve heard weather frequently cited as a factor affecting new home building (and for good reason) for both good and bad.
Also, if I was planning to buy a house, I would prefer to look at it first. Favorable weather would certainly make it easier for me, but I think it wouldn’t make me more likely to buy a house (there’s other factors here.) Bad weather would, on the other hand, definitely delay me to an extent, because I’d think it’s harder to do inspections of many sorts when the wind’s blowing like mad or the snow’s a foot deep.
Swan 04.24.07 at 8:07 pm
That’s crizazy. Here’s a link you may like
Pug 04.24.07 at 8:39 pm
Is there a journalist who can explain this?
I’m no journo, but I can try. He might have said something like this: “Sales of existing homes took the largest drop in 18 years because the banks that loan to buyers with no equity and bad credit are all on the verge of collapse, prices, especially in the West, are ridiculously high and the era of pumping blue sky and hot air into real estate is coming to an end”.
I wonder how the National Association of Realtors would have liked that quote?
tom hurka 04.24.07 at 9:43 pm
Well, in the article Lereah (about whom I know nothing) is quoted as saying much more about how problems in the subprime market — i.e., lenders getting nervous — are holding down sales than about the weather; it’s on the basis of those problems, and nothing about the weather, that he predicts sluggish sales for April, May, and June, and no full recovery until 2008. Kieran’s quotations are therefore highly selective and, frankly, misleading. And if weather had no effect on the real estate market, house sales in Canada in January would be the same as in June. Guess what — they’re not.
Walt 04.24.07 at 9:46 pm
Who pissed your Wheaties, Tom?
Thomas 04.24.07 at 9:47 pm
Lereah may be as bad as many suggest, but this example doesn’t prove it. After all, the following is what Lereah had to say about January’s news:
David Lereah, NAR’s chief economist, said observers shouldn’t overreact to the sales gain, or to other short-term effects. “Although we’re expecting existing-home sales to gradually rise this year, and buyers are responding to the price correction, some unusually warm weather helped boost sales in January,†he said. “On the flip side, the winter storms that disrupted so much of the country in February could negatively impact the housing market.
http://www.realtor.org/press_room/news_releases/2007/ehs_feb07_existing_home_sales_improve.html
nick s 04.24.07 at 10:31 pm
So why does he get quoted? Or at least, without a qualifier.
Journalists are lazy. Deadlines are tight.
Quotemills exist in lots of sectors. They’re the equivalent of Z-list celebs who’ll show up to the opening of a crisp packet. Camille Paglia for socio-bullshit, Rob Enderle for tech bullshit, and I’m sure that people could come up with other reliable Rolodex entries in their own fields.
wolfgang 04.24.07 at 10:59 pm
> Sales of existing homes plunged [..] reflecting bad weather
I thought people buy homes (at least to some extent) to be protected from bad weather…
dearieme 04.24.07 at 11:11 pm
6% of economists just write footnotes to Smith.
79% of economists tend towards “Shaman for Rationalizing the Juju.â€
82% of statistics are made up on the spot.
Tom T. 04.25.07 at 12:01 am
You’re confusing weather and climate.
(kidding)….
MikeJ 04.25.07 at 12:28 am
“And if weather had no effect on the real estate market, house sales in Canada in January would be the same as in June. Guess what—they’re not.”
I thought that was the effect of people not wanting to move while the kids were in school. I suppose we could look at what happens in the southern hemisphere for a control.
radek 04.25.07 at 1:01 am
When you think of all the bad things in the world that get blamed on Weather it’s… well,… it’s just not fair! Housing market sucks cuz of the Weather. The home team lost cuz of the Weather. Old people’s bones hurt because of the Weather. People are cranky because of the Weather. Files take long to download and webpages crash because of the Weather. George Bush got elected because of the Weather. Some (partial) series won’t sum because of the Weather. Girls pay no attention to me because of the Weather. The weather is bad because of the Weather.
Nobody sticks up for poor ol’ Weather. Even if they say “nice Weather” it’s usually in the context of “I didn’t do my work because the Weather was so nice” – the Weather is to blame!. We need to have a WAP. A Weather Appreciation Day. Better yet make it a month. I vote February. In the meantime, when you go outside tomorrow, say “How’s it going, Weather, how is your day?” be it rain, or hail, or snow. The Weather will appreciate it.
Here’s more proof that the Weather gets short shrift:
http://wwwa.accuweather.com/kids/worst.asp
Where’s the fair and balanced “Best Weather Cartoon”?
abb1 04.25.07 at 7:19 am
#23: You, liberal un-American pussy. Weather should be happy she’s not being sued by the Realtors for all she’s got.
derrida derider 04.25.07 at 10:35 am
One of the reasons no-one ever admits to being an economist at parties is that most non-economists think this sort of voodoo is what economists do.
C. L. Ball 04.25.07 at 2:26 pm
The AP writer was generous; the NAR site release attributes the drop mostly to bad weather in Feb. Remember, sales were rising for the prior 3 months, so they are looking for novel factor to explain the decline.
Since I’m looking for a house, I’d agree that Lereah’s remark is intuitively plausible if economically implausible. A house viewed in overcast or rainy whether looks plain dreary. But so long as buyers fear that someone else will make an acceptable offer on a well-located, well-maintained house, they will make an offer, rain or shine. That they were suddenly not doing so in March indicates that the market is shifting.
Jon H 04.25.07 at 2:45 pm
“Quotemills exist in lots of sectors. They’re the equivalent of Z-list celebs who’ll show up to the opening of a crisp packet. Camille Paglia for socio-bullshit, Rob Enderle for tech bullshit, and I’m sure that people could come up with other reliable Rolodex entries in their own fields.”
AEI for war bullshit, CATO for (hugely predictable) tax bullshit, Heritage for culture war bullshit.
No Longer A Urinated State of America 04.25.07 at 3:33 pm
“Chief Shaman for Rationalizing the Juju.â€
Surely this is a description of most professional analysts?
radek 04.25.07 at 4:09 pm
Admitting to being an economist at parties usually involves one or more of the following, none of them pleasant:
1. They ask you if the stock market’s gonna go up. How the hell should I know? Economics tells you that I wouldn’t know.
2. They tell you that we’re gonna run out of oil. Not in your lifetime.
3. Some English major wants to argue with you about Marx. Unfortunetly they haven’t read him.
4. They tell you, “Oh, my uncle is an accountant”. That’s nice.
5. They say, “the weather’s bad today”. Leave poor weather alone.
radek 04.25.07 at 4:12 pm
…and if we’re gonna get bi-partisan with the “X for Y bullshit” thing then you gotta throw in:
EPI for trade, union and min wages bullshit.
(to their credit they’ve laid off the immigrants)
Henry (not the famous one) 04.26.07 at 3:15 pm
According to Achen and Bartels, the weather is to blame for Bush’s election in 2000: http://www.newyorker.com/archive/2004/08/30/040830crat_atlarge?currentPage=1.
Comments on this entry are closed.