I have been listening to the spin by NAR spokesman David Lereah. The contradictions are nothing sort of amazing.

In Looking for a Bottom on November 11th the Chicago Tribune quoted Lereah as saying:

1) “We need a price decline, we were overbloated”
2) “In 2007, it will be a flat year, maybe 1 percent [sales] drop, and that’s it,” “After 2007, we’ll be back to expansion again.”

Which is it, #1 or # 2? Or are we supposed to believe a 1% drop cures overbloatedness? Even if anyone was stupid enough to believe that a 1% drop cured overbloatedness exactly why wouldn’t the promised expansion put us right back into overbloated territory again?

On November 13th in Realtors lament prices Lereah moans that home prices are too high.

1) “It’s affordability – it’s not just mortgage rates that make homes affordable, it’s prices. I hope that as affordability starts to improve we see more first-time buyers again,” Mr. Lereah said

Back on September 25th in U.S. Existing Home Sales Fall 0.5% in August Lereah said.

2) “We’ve been anticipating a price correction and now it’s here. The price drop has stopped the bleeding for housing sales. We think the housing market has now hit bottom.”

Once again is it #1 or is it #2?
If houses are not affordable then how have they hit bottom?
If housing has hit bottom then why do we need a decline to cure overbloating?

Inquiring minds may be wondering exactly what is in the punch that would cause 30,000 people to show up for a NAR annual meeting and listen to such nonsense. When did he call for that price correction anyway, and what evidence is there that the bleeding has stopped?

$40 Million Ad Blitz

Even though housing has bottomed a NAR ad blitz touts the housing market.

The National Association of Realtors is spending $40 million on full-page ads in the nation’s biggest newspapers, including the Los Angeles Times, to convince people the market is A-OK.

“Don’t delay,” the ad says, urging readers to call Realtors, which represents 1.3 million brokers and agents.

If that ad proved anything it is the NAR is in a panic state and that housing has NOT bottomed. It was clearly a waste of $40 million dollars.

The theme of the ad campaign is
1) It’s a great time to buy a home
2) It’s a great time to sell a home

For the third time today I am asking is it #1 or is it #2?

Carrol Loyd in Don’t Delay! Buy Or Sell Now! Right? writes:

This ad campaign seemed to come straight from the Mad Hatter’s tea party.
How can it be a good time both to buy and to sell? Isn’t that like saying it’s a good time both to buy Microsoft and to sell Microsoft?

To answer Carol’s questions: It’ can’t be good time to both buy and sell. As for the second question, given that one has to put up considerable margin to buy stocks but one can buy a home with 0% down it’s hard to say exactly what it’s like. For members of the NAR however, “It’s [always] a great time to generate a commission.”

NAHB Infomercials

Not to be outdone by the NAR, the National Association of Home Builders is making a package of “It’s a Great Time to Buy” ready-to-use ads available to its members for free. Resources in the buy-now package include:

  • Talking points, Q&As; and a sample press release
  • Sample op-eds, letter to the editor and newspaper columns
  • An economic backgrounder
  • Print and radio advertisements
  • Public relations advice on getting the message out through the media, events and Web sites
  • A home builders association guide on how to make the most of the package
  • Sample member communications, including a newsletter article and tips for engaging members in the campaign

A bunch of phony letter to the editor columns and “press releases” is just what we don’t need. Those sample letters might be interesting but unfortunately they are available only to NAHB members. General consumer based propaganda from the NAHB can be found here.


The GlobeAndMail is reporting KB Homes CEO quits in stock option scandal.

Bruce Karatz, chairman and CEO of KB Homes, agreed to retire Sunday and repay the Los Angeles-based company $13-million (U.S.) after an internal report concluded the home construction company incorrectly reported stock option grants.

The company also announced the firing of Gary A. Ray, head of human resources, and the resignation of Richard B. Hirst, executive vice president and chief legal officer.

The KB review found the company used incorrect measurement dates for financial reporting purposes for yearly stock option grants from 1998 to 2005, the company said in a statement. As a result of the errors, KB expects a non-cash compensation expense of no more than $50-million. It said the errors may also require an increased tax provision.

Mr. Karatz was one of the highest-paid executives in 2005, making $155.9-million, mostly from exercising options, according to the Wall Street Journal. He had served as KB’s CEO since 1986.

“I am extremely proud of everything that the entire KB team and I have accomplished over the past 20-plus years,” Mr. Karatz said in a statement.

Wasn’t $100-125 million enough for you Mr. Karatz?
PrudentBear had this comment:

“Since 1992, he has reaped nearly $180 million from exercising options. Last year, he made more than $150 million from salary, bonus, restricted stock grants and options exercises. The options exercises accounted for the bulk of his pay. The backdating appears to have begun in 1998, when Mr. Karatz received more than 450,000 options. That year also apparently marked a shift to much larger options awards — in each of several previous years, Mr. Karatz had received 100,000 options or fewer. His grants between 1998 and 2001 appeared particularly well-timed. In that period, he recorded one grant dated the day the stock touched its lowest closing price of the year, another at a quarterly low, and two more at monthly lows. One grant of 450,000 shares carried the date of Oct. 25, 1999, and an exercise price of $17.75, the year’s lowest close.”

Now, that’s a track record to be proud of for sure.

Notes and Addendum.
The above originally appeared in Whiskey&Gunpowder; on November 14.

Perhaps straight from the “Sample op-eds, letter to the editor and newspaper columns” from the NAHB “buy-now package” we see the following advertisement from a homebuilder presented as an opinion in the Asbury Park Press on November 15th:

Home buying a good investment in “down” cycle.

The homebuilders of New Jersey are still building and selling homes. The housing industry always has and continues to drive the local and state economy. Despite alarming reports of a “doom and gloom” market, real estate remains a solid, historically proven investment.

Contrary to what you have read, buying a new home is not a risky business. Since the national Savings and Loan crisis in the late 1980s, when banks failed as a result of overextended construction lending, a number of safeguards between builders and lending institutions have been established. These stringent regulations require banks to have sufficient net assets to protect themselves in the event of losses. Moreover, banks are exercising more fiscal caution and have established tighter credit guidelines.

In the 1980s, financial institutions were much more lenient in providing funding for “spec” houses under construction, but not yet sold. Today, residential builders may get financing only for the homes that are already under a sales contract and, thus, do not put themselves in a position of overextending financially with unsold inventory.
Not only can homebuyers remain confident about purchasing a newly constructed home, it’s a buyer’s market. There is no better time to buy a home than today. Prices are lower, interest rates are favorable and holding, and builders are more competitive.
Marc J. Siegel is president of the Shore Builders Association of Central New Jersey, Lakewood.

Much of what Siegel presents in regards to lending practices, credit guidelines, and spec building is easily refuted. Of course cancellation rates were not mentioned at all. Such writings do not belong on the opinion page but under the classified ad section.

Mike Shedlock / Mish/