It’s already been widely reported that National Association of Realtors Chief Economist David Lereah, who spearheaded the NAR propaganda tactics that I often criticized on these pages, is on his way out.

Less widely reported was the absurdity of one of Lereah’s parting shots.

To his credit, Lereah finally adopts an appropriately concerned tone in a recent Chicago Tribune article, admitting among other things that “[w]e’re in a real estate recession.” But then he follows it up with this whopper:

Just four months ago, it looked like we were on the road to a very nice recovery. Then the subprime [mortgage] market blew up, and that has substantially inhibited lending. It was a monkey wrench that was thrown in; no one would have predicted it two years ago, no one.

This claim is absolutely laughable. Perhaps Lereah and company chose to keep their collective head in the sand, but the fact is that plenty of analysts long ago suggested that years of stunningly lax lending would eventually end in increased forced sales and tighter lending standards. As a matter of fact, the post-EZ-credit backlash has been one of the cornerstones of the bearish housing argument practically from the outset. Here is but one example from a February 2006 article I wrote for

The scary part is that it seems almost inevitable that many homeowners will run into financial troubles. The preponderance of adjustable-rate mortgages (ARMs) exposes borrowers to higher monthly payments once their loans begin to reset. Given the rather inexorable rise of short-term rates over the past year, ARM holders with loans that reset anytime soon are likely to see substantial payment increases.

Even worse off are holders of interest-only and negative-amortization loans, which basically allow the borrower to get lower payments up front in exchange for higher payments later on. These borrowers will eventually have to start paying off principal in addition to taking the hit on higher interest rates. The head of the U.S. Office of the Comptroller of the Currency recently estimated that such borrowers could see their payments increase 50 percent or even 100 percent.

This wasn’t quite two years ago, I will admit, but it’s the earliest I can find because I’d only joined shortly before the article was written. But I (on my own blog) and many others have warned for years that there would be an eventual downside to all that reckless lending.

Lereah is employing precisely the tactic I outlined in a recent article rebutting an editorial by the Union-Tribune, who also treated the subprime fallout as a bolt from the blue:

This is the type of permabull revisionism that we can expect a lot more of in the months and years ahead. It goes something like this: “We were right to predict infinitely rising home prices, but who could have foreseen Factor X?” Factor X might be further mortgage defaults, employment weakness, a consumer slowdown, outmigration, or any number of other problems. It will be discussed as if it was some entirely unpredictable exogenous shock, and that the bullish analysts’ predictions would have been spot on had the X-Factor not come into play. The truth is that the X-Factor will not be some external shock as they’d have us believe, but a likely if not inevitable result of the excesses of the housing bubble.

Well, Lereah has played right along in his typically unsubtle manner.

I think it’s entirely fitting that Lereah’s last words should be so self-serving, so oblivious, so verifiably untrue, and so generally insulting to thoughtful people everywhere. With three sentences, David Lereah has offered a perfect summation of his storied career at the NAR.


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