Stress Test House Price Predictions Right on the Money

Calculated Risk did an excellent post showing a graph of how house prices have tracked in comparison to the baseline and adverse estimates used on bank “stress testing”. Although it’s only been two months, the actual real estate prices are coming in in between the two estimates, closer to the adverse estimate.

The accuracy of the prediction (so far) highlights how much baloney is out there regarding real estate. From the NAR to many local Realtors, we’ve seen nothing but deception about the real estate market. I wondered if it was just because real estate is such an imperfect market that maybe even experts can’t work out what’s going on. It turns out they can.

If it is possible to work out future real estate prices and they are going to fall between 13% and 24%, why don’t they fall instantly? I suspect the answer is misinformation from Realtors. If everyone accepted these predictions, prices would fall instantly because there are not many people who are willing to pay 20% extra just to execute a transaction a year or two earlier. Enough people are spreading misinformation that market participants are confused as to what is going on.

I cannot explain why Realtors seem to lie more than other industry associations. The lies seem to be ones that would decrease sales volume, which is how they make their money. Maybe it’s because they know they’re at risk of becoming obsolete. Computers do some of what Realtors used to do. When you look at the fee taken by all the people involved in a real estate transaction (i.e. title company, title insurance, home inspector, loan fees, taxes) the amount the Realtors take is outrageously high.

There will always be a need for someone to help people find buyers for their property and to handle some of the administrative stuff. If Realtors want to continue this function and continue charging around 6% of sale price, they need to provide top notch help and to start being honest.

I don't mean to condemn Realtors. They have helped me in both of the two real estate transactions I have made in my life. My honest question, though, for the organization as a whole is, “Why do you guys lie so much?”