BusinessWeek on Housing

Though their cartoon drawing leaves something to be desired, BusinessWeek seems to be on top of things when it comes to the housing market - they have been one of the more objective voices on this subject from within the ranks of the mainstream media in recent months.

The current print edition had this short piece by Mara Der Hovanesian about the bottom in the housing market now being called regularly by the National Association of Realtors and many economists, including none other than Alan Greenspan.

BOOM AND BUST
About That Short Housing Slump…

Has housing hit bottom? Not if history is any guide, says Hugh Moore, a partner at Guerite Advisors, a money manager in Greenville, S.C. Using data from the seven previous housing cycles since 1959, Moore concludes that the sector will fall further—and land hard. Take housing starts. In the past, they fell an average 51% from peak to trough. So the current downturn, with housing starts off about 30% from the January, 2006, peak has further to go. And it may meet recession on the way. That's because in six of the seven cycles, when starts fell more than 25% from their most recent peaks, the economy tanked.

Another gloomy stat: In the same seven cycles, the amount people spent on new housing as a percent of gross domestic product fell an average 28% from market peak to trough. Worse, in six cycles, recession kicked in when the ratio fell more than 10% from its most recent peak. In this slump, Moore says, that ratio has fallen 10.5% from its fourth-quarter peak.

History also shows housing corrections take an average 27 months. Thus, the current doldrums may linger a year or more. "It's just going to be this slow, grinding drain on the economy," says Moore, who adds that month-to-month housing stats producing relief rallies are "just noise."

Peter Coy then weighed in with this story about re-listing properties that sit too long on the Multiple Listing Service.

New Listing! (Sort Of)
Agents are pulling houses off the market and then presenting them as new offerings

Real estate agent Ross Simone wasn't attracting any potential buyers for a house in Mechanicsville, Md., that had sat on the market for months, so last November he took action. He pulled the house out of the regional database of active listings and then immediately reinserted it, changing the property ID number used to track properties over time. The result: The house appeared to be hitting the market for the first time. "It's in the best interests of my client [the seller]," Simone said in a November interview. "I started doing it consistently this year. I do it as much as I can."

With open houses as quiet as death lately in many parts of the country, sellers' agents are trying everything they can to make a sale, including sometimes tweaking the computerized data that potential buyers depend on. Fresh listings attract attention and can fetch higher prices because buyers are less likely to make lowball offers.

Real estate is largely self-regulated. In most of the U.S., agents are responsible for entering information about the homes they're selling into a database that is maintained by the local Multiple Listing Service. Each of the 900-plus MLSs sets its own rules. The trick of making old listings appear new is against the rules of Simone's MLS, although he said later that he didn't know it at the time.

The days of self-regulation in the real estate industry are probably numbered.

Whether it's a long slow leak or a real popping sound, the nation's housing market is in for a painful adjustment to get home prices back in line with fundamentals such as incomes and rents (yes, fundamentals will again matter - just ask the mortgage lenders today).

Realtors will not likely provide much help during the adjustment process.