Realtors cut sales forecast, again

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News item: The National Assn. of Realtors has again cut its sales forecast for 2007.

Reuters via CNBC: ‘U.S. existing home sales will fall further and prices will drop more sharply in 2007 than earlier expected, the National Assn. of Realtors predicted Tuesday. The NAR trimmed its sales forecast for the seventh straight month and widened its predicted drop in existing home values.

‘Existing-home sales should hit a pace of 5.92 million units this year, down from the 6.04 million units it predicted last month.’

Our take: We’ll skip the cheap shots at NAR’s forecasting abilities; assuming the NAR puts out a fact-based forecast that it truly believes in -- we’ll discuss that assumption below -- these revisions are further evidence the housing market is continuing to weaken; by that, we don’t mean the trend is downward; we mean the downward trend is accelerating. That’s a pretty big difference.

Now, back to that assumption: It’s possible the NAR forecast is not really a true economic forecast, but a kind of optimistic sales forecast, in which the NAR always expects the market will soon take a turn for the better. Under that scenario, a downward revision by the NAR is not a sign that the market is worsening -- it’s simply proof that the market is staying on the same trajectory, rather than turning upward. But, by extension, if that’s true, the NAR’s forecast is essentially a worthless marketing effort, and we should ignore it entirely. For now, we err on the side of taking the NAR seriously, and believing today’s news marks a further weakening of the housing market.

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