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Tales From the Boom and Bust: Bubble? What Bubble?

Even as the clouds gathered, some housing analysts saw only clear skies.

>>This item is part of the May 2010 cover story Tales From the Boom and Bust. To read an excerpt from the article, click here. To read the complete account of the rise and fall of the housing market in Washington, pick up a copy of the magazine, now on newsstands.

Some economists saw a bubble in the housing market years before it burst. But that didn’t discourage National Association of Realtors chief economist David Lereah, whose forecasts—quoted widely by news outlets—remained sunny even as the signs of a crash became obvious.

His successor, Lawrence Yun, continued the cheerleading. Here’s a look back at what they had to say:

February 2005: Lereah publishes his book Are You Missing the Real Estate Boom?: Why Home Values and Other Real Estate Investments Will Climb Through the End of the Decade—and How to Profit From Them.

April 2005: “Any talk about the housing market crashing is ludicrous,” Lereah tells the Washington Post.

August 2005: “All the doom and gloom forecasts of a housing debacle are not only irresponsible but also downright wrong,” Lereah says in a statement from the NAR.

November 2005: During a PBS NewsHour appearance, Lereah admits that real estate will see a dip, saying, “We’re going to drop significantly, but it’s not a balloon bursting.”

February 2006: The title of the paperback edition of Lereah’s book is changed to Why the Real Estate Boom Will Not Bust—and How You Can Profit From It.

October 2006: Moody’s Economy.com publishes a 195-page report predicting a crash in housing prices in certain areas. Lereah tells the Chicago Tribune: “I don’t think I would use the word crash. When you use a word like that, it’s almost a self-fulfilling prophecy in the housing market. These are people’s homes. Their retirement is depending on it.”

December 2006: Lereah tells Canada’s Globe and Mail that the worst has arrived and prices can only go up: “It appears we’ve hit bottom, the price drops are necessary to stir sales. It is working.”

March 2007: “I expect prices and sales to be modestly growing by June in most of the country,” Lereah tells CNNMoney.com, “but we’ll have to go into 2008, maybe even 2009 before we get even close to the peaks we saw in late 2005 or early 2006.”

May 2007: Lereah leaves his position and is replaced by Lawrence Yun.

January 2008: The subprime-mortgage crisis is over, Yun tells the Denver Post.

June 2008: Yun tells Newsweek that “home sales and prices in most of the country will improve during the second half of 2008.”

July 2008: “I think we are very near to the end of the housing downturn,” Yun says, according to the Associated Press.

January 2009: In an interview with CNNMoney.com, Lereah admits, “I worked for an association promoting housing, and it was my job to represent their interests. . . . I would not have done anything different. But I was a public spokesman writing about housing having a good future. I was wrong.”

November 2009: MarketWatch reports that the NAR forecasts 5.69 million existing-home sales in 2010, up from an anticipated 5.01 million in 2009. “The fear factor will no longer be at play in 2010,” Yun says.

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