There are a lot of folks who deserve some time in the public stocks for their doings during the housing bubble, and one is David Lereah, the much-scorned former chief economist for the National Association of Realtors.
We’re a bit too civilized these days for the stocks, but we do have the press to heap scorn on our miscreants.
This morning, it’s page one of The Wall Street Journal for Lereah, who gets this headline:
Realtors’ Former Top Economist Says Don’t Blame the Messenger
Mr. Lereah Called ‘Soft Landing’ in 2006; It Didn’t Come, and Now His Portfolio Stinks
The Journal story points out that Lereah was beyond bullish and let’s him imply that he was because of who he worked for. But the paper let’s the issue pass too easily: Here’s Lereah last week admitting what he did explicitly to Money:
Q. Were you wrong to be so bullish?
A. I worked for an association promoting housing, and it was my job to represent their interests. If you look at my actual forecasts, the numbers were right in line with most forecasts. The difference was that I put a positive spin on it. It was easy to do during boom times, harder when times weren’t good.
The Journal story has some tough quotes:
Soon, mainstream economists and the press were calling him out. “I thought it was criminal that he kept saying we’d reached bottom,” says Ivy Zelman, former housing-market analyst at Credit Suisse and now head of her own housing-sector research firm. She says she dubbed Mr. Lereah “Mr. Liar-eah.”
But ultimately lets him off a bit too easy. The Journal inexplicably misses that in addition to writing his ill-timed book pumping housing, he also wrote a book called The Rules for Growing Rich : Making Money in the New Information Economy at the height of the dot.com bubble.
This isn’t the first time Lereah has come in for tweaking from the Journal, which gave him a prominent spot in a story more than two years ago about renters laughing at those who bought into the housing bubble hype. It included a mention of the David Lereah Watch blog, which today’s story for some reason doesn’t.
What else isn’t mentioned in the story? How much the press, including the Journal relied on Lereah as an “expert” source, or at least as the representation of a major interest group. Here’s an embarrassing example from July 2006, after the bubble had already started to deflate. The WSJ put this on A2:
A gauge of future home sales turned upward, indicating the market is stabilizing, an industry group said Thursday.
The National Association of Realtors’ index for pending sales of existing homes increased at a seasonally adjusted annual rate of 1.3% to 113.4 in May from April’s 111.9.
The index was 10.1% below the level of May 2005.
“The slight change in pending home sales indicates the market is beginning to level out,” said David Lereah, NAR’s chief economist. “This is consistent with our forecast, which is showing a soft landing for the housing sector.”
I count that the WSJ mentioned Lereah’s name eighty-two times during the prime bubble years of 2003 to 2006. That did include James R. Hagerty’s mostly derisive review of Lereah’s disastrous 2005 book “Are You Missing the Real Estate Boom?”, but almost all of the eighty-two used Lereah as a source, including a commercial real-estate story from 2005 by one Ryan Chittum. Ahem (editors took a Dow Jones wire story about housing and pasted on three paragraphs to the end of my story. Honest!).
Now, the Journal wasn’t alone. The New York Times quoted Lereah (somewhat more skeptically) twenty-two times in those same years, while The Washington Post gave him space thirty-eight times.
This isn’t to say that reporters should just ignore somebody who represents a major force in the industry they’re covering. But we do need to carefully evaluate the credibility of who we talk to and anyone covering real estate who was half awake in those years should have known Lereah was a shill and not a good source of information.
As any reporter knows, there are lots of ways to tip off the reader that what a source says may need to be taken with a grain of salt.