Inman News' Matt Carter digs into the housing price index debate today, suggesting that those attempting to back indexes published by the NAR and OFHEO (and disparage indexes like the Case-Shiller) lack a basic understanding of what the indexes really capture. We won't cover the whole analysis here, because it's long, in-depth, and well worth your time to read. But we will note that there is an interesting dichotomy in the industry variously called mortgage banking, real estate finance, mortgage finance, and so forth. Those backing the NAR stats are invariably those on the transactional side of the real estate business -- the production side, if you will. Those that tend to sneer at the NAR's stats and rely on the Case-Shiller (and likely the newly-introduced IAS360) come from the investment side of the business. Witness the following argument from Inman News columnist Bernice Ross:
"Ultimately, the question is whom should you believe -- the academicians and Wall Street with their complex derivatives that gave us the subprime mess, or NAR, the federal government and the real-world numbers from publicly traded real estate companies?"
Ross, perhaps not surprisingly, comes from the transactional side of the business -- the side that likes to sneer at Wall Street and its modeling attempts, and has done so for years. Carter's analysis takes Ross' flawed ethic behind the woodshed and destroys it, so we won't here -- but we want to note that despite the industry's historic crisis, a crisis that is as much about housing as it is about mortgages, it's certainly disheartening to yet see those with access to a media platform continue to push the sort of short-sighted approach to this business that really drove us into this mess in the first place. I'm referring to the idea that what happens in origination is one thing, while what happens in securities markets and with the mortgage loan is entirely a different thing -- that sort of "my turf, your turf" approach led originators to care little about what was being originated, and secondary market participants to care little about the collateral they were actually securitizing. Regular readers know that I started HW with the mission of connecting primary and secondary market participants, and it's an idea that many of those taking a longer-term view of the industry have embraced, because they understand that's where this business -- whether we call it housing or mortgages -- is ultimately headed. It's no longer good enough for a self-described real estate coach such as Bernice Ross to sneer at investor-types, any more than it's worthwhile for a secondary market bond investor to choose to ignore collateral trends in a particular housing market. If I accomplish anything with Housing Wire -- online and in print (subscribe today!) -- I hope it's being able to effectively kill off that sort of flawed thinking.