Housing Cheers Turn Gloomy
FROM The Chicago Tribune May 6, 2007
Long criticized as too upbeat, Realtors’ departing economist now sees recession.
… “We’re in a real estate recession,” said David Lereah, chief economist for the National Association of Realtors, … “I’m projecting the first (nationwide) price drop since the Great Depression … We’re going to have negative home prices in 2007.”
Economists generally agree that the (real estate) slide did begin in fall 2005. That year, home sales exceeded $7 million and have since tapered to a current rate of $6.1 million. Though that’s still historically solid, the inventory of homes for sale has climbed to a record 30-month supply.
Lereah said the market overheated primarily because of lax lending practices and record numbers of speculators who bought houses at inflated prices to flip for profit. … making zero down payments with no documentation, that’s just irresponsible. “But the Realtor, the lender, the title attorney, they all got wrapped up in the frenetic pace of the boom.”
… “We strayed from (economic) fundamentals, and we’re paying for it. It’s not an all-out bust, not a crash in real estate, but it is a recession. This is going to cleanse the markets and in the long term this is what we have needed.” … Nonetheless, he said housing’s long- term prospects are good. …”I think it’s the best investment anybody can make.”