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Residential Department: Q&A: David Lereah, National Association of Realtors: July 2007


Q&A: David Lereah, National Association of Realtors

David Lereah, Former senior vice president and chief economist, National Association of Realtors

As the much-quoted chief economist for the NAR, David Lereah dispensed forecasts and weathered criticism as the market turned. With a new book, All Real Estate is Local, and a new job at Move Inc., Lereah tells us about what he has learned and what he sees as the real estate industry's next move.

Some industry observers say you’ve offered unrealistic, “rosy” predictions of the housing market in the past few years. How do you respond? Yeah, I’m the “upbeat economist.” Representing the NAR, you’ve got to be somewhat upbeat. The numbers are what they are. You don’t change them.

But it’s how you interpret the forecast and where you’re going with it. Being upbeat was the right thing to do until the [non]prime problems blew up. I didn’t see them coming the way they did. I don’t think anyone did. I’ve had to revise my forecast downward because of [non]prime. 

You’ve recently said the drop in home sales reflects “the effects of a decline in [non]prime lending and tighter lending standards.” How will these issues continue to affect home sales this year? Lenders are already tightening standards. The [non]prime companies that went belly-up aren’t there to make the loans. The big companies are nervous and won’t make a lot of these loans. So there are a lot of high-risk borrowers — I estimate about 400,000 of them — that won’t get loans. That’s a significant number of homes that won’t be purchased.

How will lower home sales will affect the economy overall? Housing will be a bigger negative on gross-domestic-product growth. And housing construction will be more negative, so it does hurt the overall economy.

Can it send the economy into recession? I don’t think so. Can it send some local markets into recession? Yes. In the areas where [non]prime mortgage originations were highly concentrated, the local markets could get hurt significantly. We might see some economic contractions in those local markets. That could lead to job losses. 

You say housing will not make a “full recovery” until 2008. What do you mean by a full recovery? I mean we should see some expansion in the aggregate numbers in the nation as a whole. So if I’m looking at the recession in real estate, it should be a two-year recession with negative growth in sales. By 2008, the market should end up being positive, when you just aggregate all the local markets as one. It won’t necessarily mean the recession is over for Florida or California or Las Vegas or Phoenix, though. The jury is still out in those areas. 

How can real estate professionals best cope with this market? Confidence is a big problem with consumers. And [mortgage professionals] need to somehow restore confidence back into the marketplace through education, explaining the implications of loans and better underwriting standards. 


Melinda Young was an associate editor at Scotsman Guide. For questions on this article, call (800) 297-6061 or e-mail

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