No Pandering, Promises or Pretense…
(Caution: I simply couldn’t make this a short post)
(Other Caution: I am not remotely an economist and my perceptions are very much that of a layman)
Wanted to know for myself
Dr. Yun has been the target of a great deal of battering from members over their blogs and other venues for awhile, now. At times I’ve agreed that there are issues with NAR’s campaigns and then there are times when I simply didn’t agree at all. Last week I was privileged enough to get an invitation from Scott Brunner (coolest state AE, ever) to join him, Ben Martin, Jim Duncan, Daniel Rothamel (all AG Writers); along with Scott Rogers and Danilo Bogdanovic.
It was a good restaurant pick, very close to my office and we got about two and half hours of Dr. Yun’s valuable time. In that time he answered both professionally and intelligently, a battery of questions that we lightheartedly called the “cross examination”.
From that series of questions, I know that the others at the table are going to talk about their perspectives. I want to talk about mine, and how, I think that Dr. Yun actually affects Realtors in their day to day practices.
Was Dr. Yun given a fair shake?
I’ve always felt that Dr. Yun was placed in a position where he was judged unduly because of the left over resentment of the guy in the hot seat before him. However, I’ve also had reservations about predictions that have been made from his office, regarding the “good time to buy” and how the market wasn’t really that bad.
Getting to sit and ask Dr. Yun a series of questions, it became clear that we only get snippets from the campaigns of a larger effort. It’s like being on twitter and trying to get a 1000 word blog post in 140 characters. In the time with him, Dr. Yun gave us a vision for his position and took full responsibility for the message from both himself and the National Association of Realtors. He was quick to point out that the member-leaders, to include Dick Gaylord did not influence his message and that the responsibility was with him.
I have to admit that I found a larger level of respect for the man, as he took responsibility for the message, knowing that there are several who question those stances.
Does the NAR Chief Economist affect me?
I’ve heard many people say that we’re all made to look bad when we see seven months of revision on market forecasts that were made, however Blue Chip Economic forecasts have been revised each month for the past 20 months. Dr. Yun explained that his forecasts are based on current information and with the fluctuating market, it’s simply the best data out there, at the time that creates the forecast. It’s also an interesting caveat to mention that had everyone listened to certain prominent economists (Mark Zandi, to name one) after 9-11; the investors and home buyers would have missed the real estate boom; as they were predicting failing housing markets for years to come.
Dr. Yun made the observation, that much of our mortgage rates are based on how confident the global capital providers are. The Fed altering the interest rates doesn’t have that large of an impact on mortgage rates.
My observation is that since perception of global capital providers is so important to keeping low interest rates, it’s in the agent’s best interest for NAR to let them know that it’s not as bad a market as the mainstream media wants us to believe.
There is a tremendous amount of information available to us everyday and I, for one, need an aggregator to let me know how this all affects the consumer or the agent practicing at a local level.
A lot of folks get upset when the NAR predictions aren’t accurate for their markets. I agree, but we need to remember that the information is reflective of the information provided across the US. There are many markets that are suffering and some that are still doing OK.
What tidbits are affecting us?
There are a few things that I learned during the lunch that you may be interested in:
Dr. Yun has a staff of 10 other economists. The final statements are his, after reviewing all the data and getting their input.
A healthy level of homes on the market, nationwide, is 5-6 months worth of inventory. Nationally, we are carrying a 10 month supply of inventory. I know that in Northern Virginia we’re much longer than that. Inventory is based solely on Active listings and Solds. They do not use Days on the Market, because of the manipulation factor of some systems. (I’ll write more about this soon)
Housing statistics are taken solely from MLS systems and not tax records. (author’s note: whereas I think this is probably the most accurate source, I still wonder what foreclosure and short sale stats would be if accurately reported by tax records and mortgage companies)
Dr. Yun has a RSS Feed for Realtors to get updates. Currently comments are closed.
There is still a significant number of people with the capability to purchase, but simply aren’t.
Historic foreclosure rates are 1%, currently they are 2%. Whereas this seems like a small percentage – it is a 100% increase. This will probably still continue to grow.
A recent survey of 2000 Realtors showed that 15% of their listings are in short sales.
All economic data that is used is verified with Government and Academic Economist. The data is always the same, the forecasting is where disagreement remains.
The federal loan limit increases that we just saw will be helpful in keeping the interest rates down for the higher end buyers. As we know, interest rates are based on the lender’s risks, the high the fed limit, the less perceived risk. Lowering the interest rates “may” stimulate buyers.
Membership at NAR
One of the questions that was asked, was in regards to membership. It was asked if the number of members would decrease and if so, but how much. Dr. Yun didn’t give specifics; but felt that another 100,000 would be likely. This would take the 1.4 million membership that we had two years ago to about 1.1 or 1.2 million.
He pointed out that after the dot com crashes seen In early 2000 that many out of work individuals went to work as Realtors. He feels with a job market reflecting the housing market, that it may be likely that those leaving the business will be replaced by those who have lost their jobs.
He also pointed out that many states re-license cycle is 2 or 3 years and that agents could keep paying their dues, holding out for a better market, while working other jobs. Therefore, it’s near impossible to actually know how many practicing Realtors there are.
Ideas? We got ‘em
While around the table we discussed some good ideas and possible future moves that might help all of us.
The group asked Dr. Yun to develop some type of tool for agents to use to break down information for more local use and how the NAR research can be used while working with clients.
There is some movement to require lenders to qualify potential buyers at both the introductory rate of an adjustable mortgage, but also at the highest adjusted rate. This will help keep buyers from qualifying now and then not being able to pay their mortgage when it adjusts up.
There is also some thought to giving tax credits for those who purchase in a certain time frame, so if you were to buy in that frame you wouldn’t pay the tax at that time. This might be a good way for the federal government to stimulate the buyers looking for a reason to buy “right now”.
What’s the future…
We asked Dr. Yun about the hiring process he recently went through moving from a staff economists to the Chief Economist. He said that his intent was to establish a well respected team that was “the” source of real estate marketing statistics in the U.S. He did note that influential individuals from other countries do meet with NAR to discuss financial issues and global market conditions
I feel that after meeting Dr. Yun that he may just meet his goal. Never… not once did he apologize for his forecasts and reports. He did this while still holding a demeanor that was humble and professional. At no point did any of us find him arrogant or moved by any question that we asked. He did not compromise, he seemed to hold the research data as sacred. He answered every question and did not seem to dodge our inquires.
When Dr. Yun was asked about the scrutiny that people from within and without of the Realtor Association were giving him, he remarked that the data was unchanging. Forecasting was done with the best possible data at the time. We also posed the question about blog activities. I was impressed that while surrounded with writers, he honestly said that he didn’t read the blogs. He was too busy and worked long hours and that didn’t permit him the leisure time to read blog posts.
Conclusion
It was a fantastic experience and I learned far more than I am capable of exploring here or that I think others might find as interesting. I would encourage everyone to go read the other bloggers who were at the lunch and get their views of the conversation.
I would point out, at this point, that blog writers and Realtors who read them are still a minority of the 1.3 million Realtors. Unfortunately far too many practitioners have no idea who the staff at NAR are, and only a few have the faintest recall that there is a National Association. We could all work at being a bit more involved and to support our Association. I know that NAR is moving forward to meet members in a meaningful way. I think that Dr. Yun taking time out his schedule to a meeting over an hour away from his office was a great sign that they are listening and taking notes. He was very willing to hear our feedback and ask us what we’d like to see from the Association.
I can only ask that others will show the same professionalism when writing about him in the future.
Michelle DeRepentigny
April 3, 2008 at 1:17 pm
“There is still a significant number of people with the capability to purchase, but simply aren’t.” and “tax credits for those who purchase in a certain time frame” make for a very interesting thought process.
What else can th re net come up with to locally stimulate these buyers?
Tony Arko
April 3, 2008 at 1:18 pm
Matt, Thanks for the post. I appreciate it. The one comment I will make is that maybe he should start reading blogs and getting an idea of what is going on from the troops on the frontlines. It couldn’t hurt in his forecasting abilities given that they have been so inaccurate of late.
Scott Brunner, VAR
April 3, 2008 at 1:51 pm
Tony — The point that Yun made at lunch was that EVERYONE’S forecast have been wrong in recent months, and some adjustment is the rule, not the exception. He noted that while Robert Schiller’s forecasts (the much touted Case-Schiller Indices) look prescient now, Schiller’s been making the same “sky is falling” forecasts since 2003 or so. He wasn’t right back then, but he’s much closer to right now. It’s like a broken clock will eventually have the correct time sooner or later.
I think the most interesting thing Dr. Yun said is that he doesn’t benchmark his forecasts or opinions on those of other economists. As he said, the data is sacred, the methodology is fairly standard (mandated by the Dept of Commerce, if I recall correctly), and it’s from that that he draws his own conclusions.
I agree with the take of the other Virginia bloggers who’ve written about the lunch: Lawrence Yun is on his way to rebuilding the credibility of NAR’s economics and research division – as well as enhancing its user-friendliness to members.
Matthew Rathbun
April 3, 2008 at 4:20 pm
Michelle – I think that you’re question about what we can do locally is a great start! We can’t all depend on others, even the National Association, to fix everything. Real Estate is local and sometimes it’s up to the agent to create their own market.
Tony – I think you’re right in that it’s important for our representatives on the national level should know how the members feel. Whether it’s him reading the blogs or someone from staff reading the productive posts it may help knowing what issues everyone else is facing.
Scott – I think that he is rebuilding the reputation, but it’s only going to be effective if the membership and other divisions of NAR buy in and support his efforts.
Bob in San Diego
April 3, 2008 at 10:10 pm
“He said that his intent was to establish a well respected team that was “the” source of real estate marketing statistics in the U.S.”
I think those are admirable intentions, but someone tell me why we need anyone at NAR to make predictions.
David
April 4, 2008 at 11:14 am
Thank for your perspective.
Bill Lublin
April 4, 2008 at 11:30 pm
Matthew – What a terrific post and thank yo ufor a well balanced and even handed explanation of what Dr. Yun’s job is. I have heard him speak a number of times, and have spoken to him on a couple of occaisions and found him to be very bright, very insightful, and very aware of the real world. I also believe that you did a wonderful job on explaining the vagaries of economic forecasting and the job of an economist liek Lawrence Yun – makes me proud to be a little brother –
Bill Lublin
April 4, 2008 at 11:39 pm
Bob – NAR needs an economist because economists really don’t forecast, they make SWAGs – Sophisticated Well Adjusted Guesses – (with the emphasis on the Sophisticated) and as the representative voices of the real estate profession, NAR wants someone who is well informed from that perspective with accurate data to make their educated projections of what’s going to happen. I would still trust NAR’s data more then data from any other sources. And as Scott points out, there are lots of people making lots of predictions or forecasts based upon their perspective, with no greater degree of accuracy, and in many cases less because they are using limited data or have a skewed viewpoint for some other reason.
Just as even a broken clock is right twice a day, even a well oiled and accurate clock can be off sometimes, but at least we can see from Matthews report that Yun is a bright , well educated man with a storng sense of integrity – just the kind of person you want to get information from.
Maureen Francis
April 5, 2008 at 10:24 am
I think that survey about the percentage of shortsales is old 😉
Jim Duncan
April 6, 2008 at 9:54 am
Bob –
Dr. Yun said that the reason that they make forecasts is because if they don’t, they don’t look like credible economists. It’s difficult to swallow that statement in the context of his predecessor’s “forecasts,” but I think/hope that in 18 months, we’ll be able to look at NAR’s economists with a different eye – one that lends credence to his ‘vision.”