Investors are Idiots - Monday's Stock Market Gains

Did anybody else feel that something was fishy about Monday's stock market bounce?

Headlines like this - "Stocks surge on bank plan, rise in home sales" made me a little curious about what they were using as a sign of a rise in home sales.

As usual, the media is making a hash of the statistics.

Yes sales rose in February over January, they almost always do as housing sales are seasonal.

In reality, according to the NAR housing sales were DOWN 4.6% from February 2008. That's the important statistic, not that they were up 5% from January.

How is Portland doing? While the number of closed sales were up 17% from January they were DOWN 38.1% from February 2008. (Clint's charts show this well here.)

So while the overall US market is showing signs of nearing a bottom, Portland is still showing signs of being in the throes of a major decline.

And once again I'm left shaking my head at the quality of the journalism in the US.

More Industry Propaganda

Clint is featuring a great sad piece of real estate propaganda on his site: "Oregon Real Estate Propaganda". The original site is here.

A couple choice quotes:

" Homeowners in it for the long-term nearly always come out ahead in building wealth."

Nearly is the key word here. In some cases it can take 10 years to recoup your investment, like the entire 90's in California. And Case Schiller has shown that housing tracks inflation over the past 100 years, today's prices are way over the historic average prices.

They're quoting Darin Provost as an expert? Who? He has 5 blog posts, and that makes him an expert? I' can think of 2-3 other Realtors with better sites off the top of my head, but I guess they weren't invited to this party.

I can't blame the real estate industry for cranking up the marketing, in a down market it's the smart thing to do.

But Clint and I can give you an alternative view, one that doesn't paint Portland with such rosy colors. Unlike this collection of industry insiders, this outsider wants to make sure you have ALL the facts, not just their hand picked facts.

Tracking the NAR's Spin and Lies

This chart is a brilliant view of the continued spin from the NAR, and how often it has been wrong. I understand the are trying to encourage people to buy and sell, but at some point if you are continually wrong you lose credibility. I know they lost my attention respect a long time ago.

It's ever funnier (or scarier) when you put this chart together with the recent news that Lawrence Yun (the NAR's cheif economist) was named as one of America's top economic forecasters.

And just so we're all on the same page, I'll believe we will have hit bottom when we see the sales decline plateau and start increasing, and inventory stop increasing. Prices will rise after that.

And don't forget, two data points is just a line. Three is a trend.

Free Fall Friday - All of Portland?

At least one Realtor blog is now predicting a decline in prices for the Portland metro area in March. "Portland Home Prices Finally Fall in March"

I have some doubts about his methodology, but I give them props for going on record as predicting a decline, and I imagine they will soon be run out of town by the Portland NAR.

Lying with statistics

One of our reader's sent in a link to this article on CNNMoney.com, "Home sales rise on biggest-ever price drop".

"The National Association of Realtors reported that sales by homeowners rose 2.9% in February to a seasonally adjusted annual pace of 5.03 million, up from January's reading of 4.89 million. It was the first month-over-month rise of the annualized pace since July."

This comment makes it seem like sales have bottomed out and are starting to rebound. The NAR (and the mainstream media) loves to quote month over month increases and declines, when they should be focused on year-over-year changes.

"Though February's pace beat economists' expectations, sales last month were still down 23.8% from a year earlier. Economists surveyed by Briefing.com expected the report to show existing home sales slowed to an annual pace of 4.86 million.

The median price of a home sold during the month fell 8.2% to $195,900 from $213,500 a year earlier - the largest year-over-year price drop on record. Before the start of the current housing slump, it had been 11 years since prices declined, when compared with the same period a year earlier.

"That's a huge drop in prices, which is how you move the merchandise," said Kasriel.

Sale prices have now fallen 15% from their peak in July 2006, and are down 14% from June 2007, when the most recent steady downturn began. That brings the median price of existing homes sold down to May 2004 levels."

There's the real story. Even though prices have dropped 8.7% from February last year (the largest drop ever recorded), sales are still down almost 24% from last February. That doesn't sound like the merchandise is moving to me.

If you look at the recent chart I posted on sales per month, you'll see that an increase in sales is totally normal for February. (this is Portland data, but I'm sure nationally you see the same trend) That's not news. The fact that sales didn't increase with an 8% decrease in prices? That's news. That means we're far from the end of the slump.

"The report is a sign that the price environment is weaker than the Realtors' most recent forecasts. Though NAR chief economist Lawrence Yun said in a release that a "notable gain" in existing home sales is not expected until the second half of 2008, the Realtors' March forecast called for only a 6.3% decline in housing prices in the first quarter, compared to a year ago. NAR also forecast a median price of $200,500 for the first quarter. Given the current environment, March sales would need a very strong showing, both in median prices and the pace of sales, to reach the Realtors' forecast."

Ouch.