It just doesn’t stop. The NAR (National Association of Realtors) has launched what they call a Surround Sound Campaign. The idea is to talk up the real estate market by making sure that consumers get the same message from all sides. We got an email explaining that:

The key is for REALTORS® to say the same messages about the market and why “it’s a good time to buy” using many different tactics including radio, print, digital media, networking via professional organizations and word of mouth. When asked at the grocery store, church or a school function, be positive and informed about your local market.

As part of this campaign the NAR has engaged professionals to train spokespeople for local Realtor organizations in media and community relations. In addition, they have made available for download a thick Surround Sound Toolkit document to make sure we all stay on the same page.

Of course, the NAR has been broadcasting variations of this message now for 2 years and has lost tons of credibility in the process. This is the equivalent of “pumping” stocks on the message boards.

Many of these talking points are simply recycled myths, lies, and distortions of facts that we have examined before but there are a few that we haven’t looked at yet:

Current market conditions won’t last long. NAR research shows that prices are beginning to stabilize and interest rates are creeping up. A modest increase in property values is expected in 2009. Well, as a cheerleader for housing, the NAR isn’t exactly an unbiased source of this kind of information are they? There are plenty of economists out there who differ on this point and the NAR has had to downgrade their forecast several times over the past few years.

Home ownership continues to be a wise investment. FHA market share is expected to triple over the next three years, from an estimated 4 percent in 2007 to 12 percent in 2009. Aside from the fact that their date range indicates that this is an old prediction what does FHA share have to do with the wisdom of owning a home?

Americans on average still believe buying a home is a good investment. Nine out of 10 consumers consider home ownership to be a sound financial decision. We’ve seen variations of this appeal to popular opinion before. If everyone believes something it must be true, right? I think the only thing this proves is that most people in this country still believe a house is an investment rather than a place to live - which is how we got into the current mess in the first place.

Homeownership is how many American families begin to accumulate wealth. According to data from the Federal Reserve Board, a homeowner’s net worth is 46 times that of a renter’s. While the statistic may be accurate they’re clearly trying to trick you into mixing up the cause and effect here. Most likely, it’s the net worth that drives the rent vs. buy decision as opposed to the other way around.

Humorous  side notes:

As an aside, under tips for buying a home the NAR says: “Commit yourself to your new home for at least a couple of years before making your next move.” Wow! A couple of years? Wouldn’t they love people to move every 2 years! I can guarantee you that if you are planning on only staying in a house for 2 years you are better off renting on average - that is if you insist on looking at your home as an investment.

This week’s Crain’s ran a story on the continuing demise of the downtown condo market. According to data from Appraisal Research Counselors sales of new downtown homes (i.e. condos) sank “73% to a record-low 685 units during the first six months of this year” compared with the first half of 2007. Here is the data:

And of these 685 units more than half were from the Chicago Spire. Given that construction cranes continue to fill the skyline and existing units continue to be foreclosed it’s a mystery how they are going to ever sell all these new units.

One would think that a) this is good news for affordability and b) this will eventually depress prices in the areas of the city that have thus far been immune from the price declines - e.g. Lakeview and Lincoln Park.

Recently the Bureau of Labor Statistics released their June numbers. For the first time in a while employment levels in the Chicago metro area actually declined year over year - not by a huge amount but by 12,500. The unemployment rate surged to 7.1% from 6.3% the previous month but this was more a result of a large increase in the labor force that was not fully absorbed. Updated statistics of this and other measures significant to the real estate market are compiled here.

Nothing irritates me more than a lack of basic ethics among certain Chicago real estate professionals. It’s an endemic problem in the industry, and one that motivated me to enter the industry. However, maybe there’s such a thing as real estate Karma, as my recent experience with a certain real estate developer has led me to believe.

The names in this story are being withheld to protect the guilty and to protect me from a slander lawsuit. Of course, if it’s true then it’s not slander but then I would have to pay my lawyer to prove it and I like my lawyer but I would rather not pay him for defending me against a slander claim.

The story begins with my client who was looking for a condo. We finally found what appeared to be a nice garden unit. However, on a subsequent visit to the property we encountered one of the other residents of the building who not so subtly let it be known that he and his wife were having issues with the developer. They had been the first people to buy in the building and they had a laundry list of problems that they felt the developer needed to address. However, according to them, the developer was either not responsive or didn’t fix things properly. Since they mentioned that many of these issues had been uncovered during an inspection of the property I asked them if I could see a copy of their inspection report. Karma #1: the developer had unresolved issues with a buyer and now it was coming back to haunt them. Oh…did I mention that the property had been on the market since August of 2007, starting at $219,000 and was now listed at $169,000?

I then went through this issue list with the developer who either claimed that the issues had subsequently been fixed or that they really weren’t problems or that they would be fixed. My client and I discussed our strategy and decided to make an offer contingent upon some important subset of these issues being fixed. Once we did that it became much clearer exactly where the developer was on each of these issues and what they were willing to do: not much. In addition, some problems that were supposed to have been fixed “next week” had still not been fixed. So our mistrust of this developer was growing rapidly. I’ll skip past a few rounds of negotiations but let’s just say that we dropped our upper limit in order to compensate for the problems and our mistrust of the developer.

Finally we agreed on terms and scheduled the inspection but between the last time we had seen the unit and the inspection it had rained - rather heavily. I think you can see where this is going - especially since this was a garden unit. When the inspector arrived he didn’t even set down his bag before pointing out that not only did the unit have water damage but that there had been an attempt to hide it. The lower two feet of many of the walls had been repainted. The inspector also found evidence of mold and, as a side note, there were serious deficiencies in the electrical wiring. That’s 3 material defects that are required disclosures by law.

We ran into that other resident of the building again and he confirmed that he had seen workmen in the unit during the past couple of weeks replacing carpeting and drywall - repairs that are purely cosmetic and won’t stop the water from coming in. I think that pretty much killed the deal right there. Within a week the listing price dropped to $159,000 and a week later it dropped to $155,000. Did I mention that when I went by the developer’s office to present the offer there were several large Mercedes in the parking lot?

Fast forward to Monday of this week. It rains in biblical proportions. Tuesday morning the listing on this unit is canceled. Coincidence? I think not. Let’s just say that in response to an inquiry my sources have now confirmed that there was extensive damage to the unit and once again the developer is making cosmetic repairs. Karma #2: they didn’t fix it correctly and now they are having to fix it again.

This is a rather interesting situation. The developer is required to disclose these problems to potential buyers. Think they will? If they don’t they can be sued by the buyer. If they do who is going to buy the place? Or will the developer just throw in a lifetime supply of drywall and carpeting? If the developer doesn’t fix the water leakage do they expect the condo association to fix it? There is a paper trail a mile long documenting this problem and there are numerous witnesses to the aftermath. Think the association will allow themselves to get stuck with this problem?

What goes around comes around.