Lies, Deceit, Greed

I have been listening to the spin by the National Association of REALTORS (NAR) spokesman David Lereah. The contradictions are nothing short of amazing.

In “Housing Industry Looking for Bottom” on Nov. 11, the Chicago Tribune quoted Lereah as saying:

  1. “We need a price decline, we were overbloated.”
  2. “In 2007, it will be a flat year, maybe 1% [sales] drop, and that’s it. After 2007, we’ll be back to expansion again.”

Which is it, No. 1 or No. 2? Or are we supposed to believe a 1% drop cures overbloatedness? Even if anyone was stupid enough to believe that a 1% drop cured overbloatedness, exactly why wouldn’t the promised expansion put us right back into overbloated territory again?

On Nov. 13, in “Realtors Lament Prices,” Lereah moans that home prices are too high:

1) “It’s affordability — it’s not just mortgage rates that make homes affordable, it’s prices…I hope that as affordability starts to improve we see more first-time buyers again.”

Back on Sept. 25, in “U.S. Existing Home Sales Fall 0.5% in August,” Lereah said:

2) “We’ve been anticipating a price correction and now it’s here. The price drop has stopped the bleeding for housing sales. We think the housing market has now hit bottom.”

Once again, is it No. 1 or is it No. 2? If houses are not affordable, then how have they hit bottom? If housing has hit bottom, then why do we need a decline to cure overbloating?

Inquiring minds may be wondering exactly what is in the punch that would cause 30,000 people to show up for an NAR annual meeting and listen to such nonsense. When did he call for that price correction anyway, and what evidence is there that the bleeding has stopped?

$40 Million Ad Blitz

Even though housing has bottomed, an “NAR Ad Blitz Touts Housing Market”:

“The National Association of REALTORS is spending $40 million on full-page ads in the nation’s biggest newspapers, including the Los Angeles Times, to convince people the market is A-OK…

“‘Don’t delay,’ the ad says, urging readers to call REALTORS, which represents 1.3 million brokers and agents.”

If that ad proved anything, it is that the NAR is in a panic state and that housing has NOT bottomed. It was clearly a waste of $40 million.

The theme of the ad campaign is:

  1. It’s a great time to buy a home.
  2. It’s a great time to sell a home.

For the third time today, I am asking, is it No. 1 or is it No. 2?

Carol Lloyd in “Don’t Delay! Buy or Sell Now! Right?” writes:

“This ad campaign seemed to come straight from the Mad Hatter’s Tea Party.

“How can it be a good time both to buy and to sell? Isn’t that like saying it’s a good time both to buy Microsoft and to sell Microsoft?”

To answer Lloyd ‘s questions: It can’t be a good time to both buy and sell. As for the second question, given that one has to put up considerable margin to buy stocks but one can buy a home with 0% down, it’s hard to say exactly what it’s like. For members of the NAR, however, “It’s [always] a great time to generate a commission.”

NAHB Infomercials

Not to be outdone by the NAR, the National Association of Home Builders is making a package of “It’s a Great Time to Buy” ready-to-use ads available to its members for free. Resources in the buy-now package include:

  • Talking points, Q&As, and a sample press release
  • Sample Op-Eds, letter to the editor, and newspaper columns
  • An economic backgrounder
  • Print and radio advertisements
  • Public relations advice on getting the message out through the media, events, and Web sites
  • A home builders association guide on how to make the most of the package
  • Sample member communications, including a newsletter article and tips for engaging members in the campaign.

A bunch of phony letter to the editor columns and “press releases” is just what we don’t need. Those sample letters might be interesting, but unfortunately, they are available only to NAHB members. General consumer-based propaganda from the NAHB can be found here.


The Globe and Mail is reporting, “KB Homes CEO Quits in Stock Option Scandal”:

“Bruce Karatz, chairman and CEO of KB Homes, agreed to retire Sunday and repay the Los Angeles-based company $13 million (U.S.) after an internal report concluded the home construction company incorrectly reported stock option grants…

“The company also announced the firing of Gary A. Ray, head of human resources, and the resignation of Richard B. Hirst, executive vice president and chief legal officer…

“The KB review found the company used incorrect measurement dates for financial reporting purposes for yearly stock option grants from 1998-2005, the company said in a statement. As a result of the errors, KB expects a noncash compensation expense of no more than $50 million. It said the errors may also require an increased tax provision…

“Mr. Karatz was one of the highest-paid executives in 2005, making $155.9 million, mostly from exercising options, according to The Wall Street Journal. He had served as KB’s CEO since 1986.

“‘I am extremely proud of everything that the entire KB team and I have accomplished over the past 20-plus years,’ Mr. Karatz said in a statement.”

Wasn’t $100-125 million enough for you, Mr. Karatz? PrudentBear had this comment:

“Since 1992, he has reaped nearly $180 million from exercising options. Last year, he made more than $150 million from salary, bonus, restricted stock grants, and options exercises. The options exercises accounted for the bulk of his pay. The backdating appears to have begun in 1998, when Mr. Karatz received more than 450,000 options. That year also apparently marked a shift to much larger options awards — in each of several previous years, Mr. Karatz had received 100,000 options or fewer. His grants between 1998-2001 appeared particularly well timed. In that period, he recorded one grant dated the day the stock touched its lowest closing price of the year, another at a quarterly low, and two more at monthly lows. One grant of 450,000 shares carried the date of Oct. 25, 1999, and an exercise price of $17.75, the year’s lowest close.”

Now, that’s a track record to be proud of, for sure.

Mike Shedlock ~ “Mish”
November 14, 2006