Lereah Utters 'Great Depression,' Speechless on Fate of the Bubble Markets

Newsweek reports on the Realtor convention:

Realtors are a professionally upbeat group, and their trade association is sometimes criticized for parsing data to present a too-positive spin. Sure enough, even amid lots of down arrows, chief economist David Lereah found reasons for optimism. Despite all the talk about a nationwide boom, Lereah says only 26 percent of U.S. home markets got really overheated, with speculators driving prices up by more than 20 percent annually.
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The caveat to this rosy view is the uncertainty about the other quarter of the country's markets—places that include Las Vegas, southern Florida, Phoenix, and California. These markets attracted speculators in 2004 and 2005, and as investors and second-home buyers have stopped signing contracts, demand has dried up.

"The biggest question I'm faced with is how far do prices have to drop and how long will it take for the correction to finally turn around in [those] markets. I don't have an answer," Lereah says, conceding that those markets could stay soft into 2008. But he counters that falling prices, while unpleasant for homeowners, are really a good thing, because lower prices will spur more buyers to make offers, and the resulting sales will help not only commission-hungry agents, but also the furniture makers, appliance companies and other ancillaries that make housing such a vital prop to the economy. And while he calls predictions that home prices might fall 30 or 40 percent "nonsensical," he can't offer a number of his own.
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Those forces make this slowdown an anomaly, which makes it hard to predict where things will head next. Says Lereah: "You'd have to go back to the Great Depression to find a housing period that is this unique."
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[M]any crowded into the convention center to attend seminars on how to adapt to the slowdown. In nearly every session, speakers spent a few minutes blaming the media for hurting the market. All those headlines about a bursting real estate bubble have a lot of potential buyers really freaked out, industry officials say, which is one reason they've begun running full-page newspaper ads reminding would-be sellers that despite slowing sales, conditions aren't really so bad.