Former housing industry economist who famously said there was no housing bubble now admits he was wrong

Posted by: Prashant Gopal on January 5, 2009

LereahNotBust.jpg David Lereah, the National Association of Realtors’ former chief economist who famously denied that the housing bubble existed even as it started to pop, is finally admitting that he was wrong.

Lereah, whose book “Why the Real Estate Boom Will not Bust and How You Can Profit From it” was published in February 2006 just before the bubble went bust, suggests in a new Money Magazine interview that his rosy outlook might have had something to do with his position as top spokesman for the Realtors. Lereah, now a private real estate consultant, says he’s bearish about the housing market and has been for a year and a half.

“I worked for an association promoting housing, and it was my job to represent their interests,” Lereah said. “If you look at my actual forecasts, the numbers were right in line with most forecasts. The difference was that I put a positive spin on it.”

The damage Lereah caused, of course, was serious, especially for the many home buyers who bought the hype. Lereah said he now expects only a modest recovery in sales activity this year.

“I was wrong,” Lereah told Money. “I have to take responsibility for that.”

UPDATE:

I just spoke with the Realtors’ current chief economist Lawrence Yun, who has also been criticized on blogs such as the “Lawrence Yun Watch” for his overly optimistic predictions.

Yun, who worked as a number cruncher for the industry group during Lereah’s tenure, said he “disassociates” himself from the way his former boss did things and is careful not to let his role as lobbyist for the group influence his work as the group’s chief economist.

“I don’t see my job as somehow spin,” Yun said. “I share the housing data and say ‘What does it mean and what it may imply about the future.’”

If people want to discount his predictions, they can, Yun said. And he doesn’t think Lereah’s admission hurts the credibility of the National Association of Realtors, though “it might hurt his [Lereah’s] credibility,” Yun said.

Reader Comments

john somebod

January 6, 2009 1:42 PM

hi testing

Dave

January 6, 2009 2:00 PM

“I worked for an association promoting housing, and it was my job to represent their interests,”

or translated into realtor speak: "Now's the time to buy!"

here's a humorous video on the subject, and you can even dance to it!

http://www.youtube.com/watch?v=Ivp4YqGCI-s

Rob

January 6, 2009 2:10 PM

Mr. Yun stated opinion that Mr. Lereah's admission doesn't hurt the credibility of the NAR is flat out denial at best, incompetence at worst, and places Mr. Yun shoulder to shoulder with Mr. Lereah. It is the public that shall make such a determination of credibility, and the public has already done so. The NAR "body politic" is viewed (rightly) as a bald-faced spin factory inflating sales potential, serving the interests of its commissions, even while the bubble it denied existed collapsed around the heads of US mortgage holders.

xyz123

January 6, 2009 2:11 PM

Too bad there are no penalties for leading innocent lemmings off a cliff. When the Pied Piper came those who lust for the American Madison Avenue dream, those dumb enough to follow, those strong willed enough to break wise thinking... all go off the cliff. Mr Lereah is this era's Pied Piper.

If our education system continues in support of teachers rather than students this country will be full of stupid lemmings. They will all ask government for handouts. Then, someday we'll have no products or services, no hope, no future, no income worth any foreign investment in our government bonds. That day will be the end of a glorious nation, "for the people, by the people"

Dr Harold Cline

January 6, 2009 2:44 PM

It is so clear that the National Association Realtors represents Realtors who have an interest in selling property at higher prices, that someone would have to be really gullible to be taken in by them. The fact that their second-rank economists justified it by forecasts and weak arguments doesn' surprise either.

The housing bubble and the associated stock market bubble was a largely a national insanity, shared by the population fairly uniformly and promoted by banks, governments, and figures of authority for a range of motives (greed, optimism, denial of real problems ) to the point of self-destructiveness. Though we have tried in the past, we can't put everyone in jail.

One does not have to sell one's house through a real-estate agent and can save as much as 6% commission, but owners do it for the convenience and the superior sales skills of the realtors. If I were buying a house, do I want to talk directly with the owner or a highly manipulative agent who I know is trying to justify their commission. The realtor doesn't guarantee the quality of the house, surveyors and inspectors do that. The difficulty for the buyer is finding houses not represented by agents. Some towns even have laws prohibiting For
Sale signs ( often evidence of collusion between real-estate agents and town officials ).

The housing market bubble and bust has destroyed any remaining credibility of the real estate agent. Will their future research publications be any more accurate or truthful?

AJ

January 6, 2009 2:44 PM

When will AMerican's stop being greedy and put more value on say, respect for everyone, hard work and better morality

Chuck

January 6, 2009 3:00 PM

Sorry. My Bad.

sam

January 6, 2009 3:29 PM

Name a talking head you feel you can trust.

cc

January 6, 2009 3:36 PM

Lereah should be tried for Fraud !!

Ballbuster

January 6, 2009 3:46 PM

BW Gopal is trying to sound as if he didn't do his own brand of bullish real estate promotion using his BW column. Gopal's pointing fingers at disgraced Lereah is an attempt to take side with the honorables. Good try. While using a good ruse, Gopal underestimates BW readers' memory of his bullish real estate column even as late as early 2008. Washing hands takes many forms but Gopal's crucifying Lereah won't clean up Gopal's sins. Judgment will come to all who participated in this real estate scam.

Todd

January 6, 2009 3:50 PM

Hmm..

Official slants data from simple truth to propaganda to fit an organization's preferred "reality". Incorrect decisions are made on pushed "reality", which leads to significant errors and overall hardship. Official leaves organization and repents. Then organization protects their self-serving and dangerous behavior by disparaging the repentant official... Yet another example of how pervasive the political and cultural corruption of the Bush administration has been.

Dante

January 6, 2009 4:04 PM

A lying realtor is news??

J-Man

January 6, 2009 4:23 PM

And President Bush still thinks the fundamentals of our economy are healthy. Umm... I think its about time we all stop listening to officials and experts...

sisyphus

January 6, 2009 4:29 PM

A lyingFirst time realtor?
A lying CEO?
A Lying Investment Banker?
A lying lawyer?
A lying Senator?
COngressman?
Governor?
President?
Drug companies?
FDA?
Billionaires?
C'mon guys, from the beginning of time, people have been, are , and will be nickel whores, and will sell their mothers to make a buck.

SHame on them, yes. Hope we make the rot in hell. But, shame on us if we are stupid enough to believe ANYTHING they say.

FBEye

January 6, 2009 4:50 PM

It's no different than the FDA saying that PRESCRIPTION DRUGS are safe, and will not harm you. It's ONE GIANT CROCK of you know what!!!!! It's like McDonald's saying that their food is good for you, & nutritious! It's like a drug dealer saying that cocaine isn't addictive! It's like the government saying that the economy will get better in the 2nd half of this year! It's like the makers of Kit Kat bars saying that 10 Kit Kats a day will improve your sex life............it's like saying that the USA is a great country to live in where people are FREE & HAPPY!!! ONE GIANT CROCK!!!!!!!!!!!! P.S. I heard that buying two Ford pick-up trucks will cure diaherrea! And buying three large GM SUV's at full sticker price will make bald men grow hair again! And buying four Dodge hemi pick-up trucks will bring peace to the Mideast!

This Guy

January 6, 2009 5:01 PM

Wait until the news breaks about the scam better known as Mortgage Electronic Regisration Systems, Inc. You are all going to quickly realize the who, what, where, when and why of the SubPrime Mortgage Scam and also have the answers as to where and what the $780 billion bailout is actually replacing. You heard it here first folks, and you are all going to be shocked at how "duped" nearly everybody in the US has been by the greedy bank CEO's and Wall Street tycoons. And all of these crimes have been conspired and protected by White House and Supreme Court Private Counsel, former SEC Ethics Board Chairman, and DOJ Expert Witness for Forensic Economic Crimes ........ ALAN SHAPIRO!!! Put your boots on people, the TRUTH is coming like a freighttrain right now!!!

Rick

January 6, 2009 5:59 PM

Why is it so difficult for someone, so obviously in the wrong for such a long time, to admit their mistake? Well, who knows, I could be wrong...
I was about online dating.

Todd

January 6, 2009 6:30 PM

Here's my perspective on systemic woes:

No system is perfect, man made or natural. A good example is unemployment rate. Economists have determined that around 4.6% is the nominal rate. To go any lower is abnormal. But because there is a guaranteed unemployment rate doesn't excuse a rate of 10%.

Also, going forward, the sickness brought onto us by the political and economic neo-cons is not limited to just neo-cons. Apples and pears both bruise and rot, its just that pears are far more prone.

Our political-economic system is the best but not perfect. It only works when it works "for the people" who must themselves be vigilent and informed, but tempered with appropriate expectations.

Make 2009 happen.

Hanrod

January 6, 2009 8:48 PM

We need to put an end to the doctrine of Caveat Emptor, once and for all. The organization this promoter worked should be liable for his fraudulent sales pitch. LET'S SUE!

Parhatsathid Napatalung

January 6, 2009 8:53 PM

Anytime you represent something, you sell your wares and lie, or get fired. Regardless of whether you are FDA, Government, Jehovah's Witness, or even Realtors. But that doesn't make them give up lying. They're hired to do that as part of the cheerleader's rah rah rah. These economist are STILL putting a positive spin on housing, if you read between the lines! He said that the housing will recover by a year. The other guy said, he don't want to associate with a former employer and should not effect the image of Realtors. More lies. The Real housing price cycles - a very clear one at that , (which is inversely proportional to savings rate) is expected to recover or reached the bottom in 2013, with extremely optimistic prediction at 2012. It's just too damn pessimistic for ANY Realtors association to even swallow. Forecast depends on how high they can put a positive spin that a gullible consumers can swallow. In fact based on the real housing price cycle (which occurs at the same time as the housing bubble since I first studied in 1970, it was clear it was nearing a peak since 2003 its start of downturn to occur sometime in 2005-2006. Again based on this chart the acceleration in the bust will occur starting 2008 to 2010. Worse is expected in 2009-2010. As a result, human greed, both the buyers and the sellers, are all in the same situation: unwilling to accept the bad news until it has already happened. By then it's too late. It takes two hands to clap, and I guess that's why people also get away with lying, the listeners also don't like to hear the bad news. LOL.

Kennio

January 6, 2009 9:21 PM

Really think this wasn't all planned? Remember when the republicans quietly changed the bankruptcy rules 3 years ago?

Robert Laughing

January 6, 2009 11:18 PM

ANYONE who would believe, let alone TRUST, a real estate huckster is the biggest fool. Do they (real estate hucksters) earn anything, if there is NO SALE? No. So they're entire function is to huckster, Huckster, HUCKSTER!!! Some, very shamelessly and that State Board of Realtors? They ignore, and avoid problem realtors....there are soooooooooo many cases where the cretin SURRENDERED their license to one state board, then moved across state lines and began their racketeering ALL OVER AGAIN, with IMPUNITY. NEVER, NEVER, NEVER trust a Real Estate person...their income depends upon them SELLING YOU, anything...not in 'helping' you. Yes, there are a few, very few, good Realtors, but the majority are incompetent or corrupt.

AC

January 7, 2009 1:08 AM

I think it's time to acknowledge that the National Association of Realtors have their own agenda, which is not in the best interests of home buyers and continue to create an marketplace that lacks transparency, feeds upon the emotions of consumers to drive market inefficiencies and lines the pockets of buying and selling agents. I am all for a restructuring of how homes get bought and sold and advocate that the housing market should go the way of any other Internet based platforms where bid and asks are not obscured by used car salesman tactics promoted and proliferated by realtors. Sites like Zillow.com and others, with the ability to have transparency, take out commissions, etc. is the way this should be in the future. In my experience, I have caught them lying and cheating to get above market deals and both buying and selling agents collude to fleece the American home buyer. I had to fire my buying agent and negotiated directly with the selling agent after I figured my own agent was playing me. Shame on them. They deserve to be made irrelevant.

AC

January 7, 2009 1:11 AM

I think it's time to acknowledge that the National Association of Realtors have their own agenda, which is not in the best interests of home buyers and continue to create a marketplace that lacks transparency, feeds upon the emotions of consumers to drive market inefficiencies and lines the pockets of buying and selling agents. I am all for a restructuring of how homes get bought and sold and advocate that the housing market should go the way of any other Internet based platforms where bid and asks are not obscured by used car salesman tactics promoted and proliferated by realtors. Sites like Zillow.com and others, with the ability to have transparency, take out commissions, etc. is the way this should be in the future. In my experience, I have caught them lying and cheating to get above market deals and both buying and selling agents collude to fleece the American home buyer. I had to fire my buying agent and negotiate directly with the selling agent after I figured my own agent was playing me. Shame on them. They deserve to be made irrelevant.

Augie

January 7, 2009 4:51 AM

Only a jerk would listen to these real estate jerks trying to boost business. So obvious it is mind-boggling!

Condominiums Toronto

January 8, 2009 6:12 AM

NAHB produces in-depth economic analyses of the home building industry based on private and government data. Our Economics Group surveys builders, home buyers, and renters to gain insight into the issues and trends driving the industry. NAHB also hosts the Construction Forecast Conference held twice a year to help you keep on top of housing and the economy. Check our economic and housing data regularly for the latest updates and insights.see more inCondominiums Toronto

doug

January 9, 2009 9:37 PM

Agents are simply trying to keep themselves relavent. The rise of fsbo sites and home valuation sites (that are many times more accurate than the comps that agents use) are going to eliminate most agents anyway. At sites like http://optionbandit.com investors share tactics on how to obtain a great deal on a house and finding it on your own. A far better deal can be negotiated on your own, as agents want top dollar to ensure a an extra couple dollars in commission.

michael

January 9, 2009 11:15 PM

""internet buying networks""
to accomplish this goal will need to use the same format of myspace or a related social network. the people on the network will combine their wealth to buy homes and businesses.
for example lets say a home is on sale, 200,000$... we could then divide this into individual shares, and the social networking site would buy this home for us. we would then get a monthly check based on the size of our individual share hold. the renter of the house would then be responisible for buying the shares from us, until the renter becomes the owner... once that happens the renter would have in his contract... the ability to stay out of the market
for a number of years, or they could sell the house back into our market for a profit. this works for businesses to and even more so. ...some examples would be ...corporate jets...semi trailers... franchises...etc.

http://socialbuying.ning.com/profile/michaelbaker

ipbre

January 12, 2009 6:43 AM

At International Property Brokers we take great pride in using our considerable experience, resources, and global connections

to unite amazing properties with amazing people. As a company, with our partners, we continue to provide outstanding services
http://www.ipbre.com/
and accurate valuations for many of the world's finest and most beautiful real estates.International Property Brokers provide

a wide range of established and effective property related services.

darrell

January 12, 2009 12:10 PM

It sounds like Lereah is hiding behind the requirements of his job with NAR to excuse his being untruthful. However, I am a Realtor, and member of NAR and I think those who believe Lereah or the NAR influenced the real estate market are not looking very deeply at what we are dealing with at the moment. If those folks believe that Realtors are liars, they might want to take a closer look at themselves. My guess is that these same people are distrustful of everyone, and choose to blame an easy target because they can't accept their own complicity in the current reality of our economy. It is an incredible reach to blame Realtors for a world-wide recession.

dave

January 12, 2009 1:24 PM

Economists make predictions based on current data. Virtually no economist anywhere predicted this market correction (aside from a very few), no world leader predicted it, virtually no business leader predicted it.

David is not a shuckster. He had the same forecast of no housing bubble as did so many well educated good economists. They forecast based on available data at the time. They are not soothsayers and thus get impacted by dramatic events as did we all.

Wes

January 30, 2009 12:02 PM

Dave - sure thing.

I won $2 million in the lottery last year. I spent it all but am ok. Therefore, looking at historical data shows that since I made $2 million last year by purchasing 5 lottery tickets, I should be able to repeat that performance this year by purchasing tickets again.

Point is - the NAR and DL looked at the data and used it to frame their position and bolster their own agenda. This is nothing new and will certainly happen again, but when looking at historical data from 1970 forward, the 'outliers', or data showing price spikes in 2003/2004/2005 were very clear, and should have led anyone doing anything for than surface research to look and ask questions if the data was skewed.

Lots of people saw this was going to happen.

Bob

April 29, 2010 1:29 PM

@ipbre your website looks like a scam.

Nothing like hiding behind your brand?

No staff / owner profiles, no experience or background, just a load of 'promises' about your contacts and experience.

Like everyone broker drinking in a bar in Mayfair.

Post a comment

 

About

BusinessWeek editors Chris Palmeri, Prashant Gopal and Peter Coy chronicle the highs and lows of the housing and mortgage markets on their Hot Property blog. In print and online, the Hot Property team first wrote about the potential downside of lenders pushing riskier, "option ARM" mortgages and the rise in mortgage fraud back in 2005—well ahead of many other media outlets. In 2008, Hot Property bloggers finished #1 in a ranking of the world's top 100 "most powerful property people" by the British real estate website Global edge. Hot Property was named among the 25 most influential real estate blogs of 2007 by Inman News.

BW Mall - Sponsored Links

Buy a link now!