Commentary: Spin this market

As the real estate industry's largest organization, the National Association of Realtors is in a tough spot with the downturn.

The eternally optimistic trade group forecasts and tracks market movements as reported by its network of MLSs throughout the nation. A doom-and-gloom forecast would make it the bad guy to members and cause some to cut their losses and exit entirely.

The trade group instead has played it safe: predicting a not-so-bad-afterall soft landing at the end of this long housing mess, and dishing out forecasts it revises down each month that serve to soften the blow for dues-paying members. (The latest one came on Wednesday.)

This strategy, however, has made NAR the laughing stock of many financial blog sites. Paper Economy draws a timeline and pulls quotes from NAR's revised forecasts dating back to December 2006, calling the latest one "another dose of truly ridiculous spin." Calculated Risk says, "Very funny. Thanks for the laughs!"

In NAR's defense, few economists were predicting a housing bust when this market began to slip. The vernacular of choice about 18 months ago was filled with a lot of "soft landings" and "market normalizing" phrases. Pretty much no one knows exactly how this downturn will end.

But enough's enough with the spin. Why can't they just tell it like it is? Some markets are doing fine, but many are struggling. And while the jobs forecast and interest rate outlook appear to be in good shape, the mortgage market remains a huge wildcard. Prices are falling in many markets, which complicates the delinquency equation as many mortgages continue to reset at higher rates and higher monthly payments.

Many wonder, is it a disservice to members to fill their heads with unrealistic optimism? While NAR says in its latest forecast, "Improvement in Mortgage Market Bodes Well for Housing in 2008," many others, like the Wall Street Journal for instance, say that underlying problems with risky mortgages are more widespread than anyone initially thought.

In an article this week, "The United States of Subprime," the WSJ analyzed mortgage data going back 10 years and concluded that we've yet to see the coming tidal wave of resetting loans that could put many more homeowners under huge mortgage payments.

"The data also show that some of the worst excesses of the subprime binge continued well into 2006, suggesting that the pain could last through next year and beyond, especially if housing prices remain sluggish. Some borrowers may not run into trouble for years," the article states.

More bad news: The nation's largest mortgage originator, Countrywide, said this week that its September loan fundings were down 44 percent from a year ago. The company will cut 5,000 jobs as a result.

So while NAR is saying things aren't so bad, other news contradicts.

NAR does a lot for its rank and file, lobbying for and against important housing bills before Congress, upholding a code of ethics in an industry that often attracts some shady characters. The group is perfectly positioned to lead the way in in-depth housing analysis, to educate members on the economics of staying in the business. But instead, it has pulled back into the safe haven of PR spin.

Stay tuned for Inman News' annual Forecaster Report Card due out in December. In it, we will take a look back at the past year and evaluate how several prominent prognosticators did with their housing predictions.

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