Realtors Blame Media for Housing Slump

Oh, now we understand. This entire slowdown in home-buying, the collapse of the subprime lending industry, the surge in bankruptcies, it's our fault -- bloggers and journalists made this happen.

This, at least, is the thrust of an essay by Lawrence Yun, the senior economist for the National Assn. of Realtors. Read the whole thing here. Highlights:

"To a great extent, we can thank steady media coverage of the real estate market “correction” for unfounded consumer concerns.... But there’s no real correction where consumers are concerned. Yes, home price appreciation has slowed considerably, and nationally we’re expecting a price drop of 1% for 2007. But that drop comes at the tail end of a five-year spurt that increased home prices by 53%. We may have taken one small step back, but that’s after taking 53 steps forward."

More: "When today’s consumers look at real estate markets, they need to use the same analytical approach as investors in the stock market. Those buyers aren’t generally concerned about the volume of stock trades on a given day. Why should they be? They’re focused on price trends. And by that measure, now is a great time for consumers to be in the housing market: Prices have steadied, and inventories are healthy."

Yun replaced David Lereah, who was widely criticized -- ridiculed is more accurate -- on blogs for being a cheerleader for the housing bubble. This essay will earn Yun similar attention -- in fact, there's already at least one blog dedicated to yun-watching, www.lawrenceyunwatch.blogspot.com.

Comments? Thoughts? (Warning: They will be slow to post; L.A. Land is outside the TMZ.)
Thanks for the tip: The new-and-improved Blown Mortgage
Photo Credit: Reuters

Comments

[brettdl]

(Uncontrollable laughter.) Okay, now that I got that out of my system I have a simple retort: So negative stories caused bankruptcies and foreclosures? Wow, I've underestimated the power of writing 1-million fold.

What really is upsetting though is that people like Yun have millions convinced the housing market IS OK. We have friends still buying and selling as if everything is just fine and dandy because the "experts" say so.

[east coast reader]

Lawrence Yun says home prices have appreciated 53 percent on average over the last five years. Here is the performance of some stock indices since December 31, 2002:

Dow Jones Industrials - up 61%
S&P 500 - up 71%
NASDAQ - up 95%
Russell 2000 - up 119%

So someone who bought a home in late 2002 would almost certainly be a lot better off today if he/she had invested that money in the market and rented a home, even after taking into account the tax advantages of owning.

[Martin Kane]

There is an element of truth to realtors' assertions that a portion of the real estate market slump is being generated by the media. This includes the hundreds of real estate landscape and bubble/burst blogs the Internet hosts.

I know. I know. Standing alone, my comment is narrow-minded and discounts the market realities of rising inventory due to affordability factors and not reduced need, desire or population. Of course, mortgage industry's practices in the Alt-A and subprime markets also contributed to the slump.

The media, however, is an unwitting accomplice in the downturn as it reports every bump, grind, statistic and opinion. The media polishes public perspection every day.

Never before did the current level of media coverage exist during a real estate market downturn. Further, the Internet is an accomplice as it offers public access to a steady stream of information from thousands of media outlets. It's all a click away.

This is all vastly different than conditions during the last market slump, when journalists and other news hounds had to sift through press releases and make phone calls for interviews with industry sources. The news was certainly "out there" during the last downturn. But the Information Age was only being discussed at the time we were busy getting used to sending and receiving e-mail.

I didn't know what Alt-A loans meant until a few months ago. I didn't understand the words "blogging" and "blogs" until a couple of years ago, when -- naturally -- media begin reporting on the new Internet phenomenon. That's the point. We're all more informed than ever before thanks to extensive media watch on the market and a level of blogging we could not have imagined even two years ago.

Propagandists are living a dream come true thanks to blogging. Media has thousands of additional sources from which to analyze and accuartely report their stores. That's before we even factor the simple fact that the public at large can contribute to blogs (sometimes subjectively) or transmit photos and videos on the Internet (objetively) that expands and enriches our access to news.

The media -- including the Internet -- is not causing the slump. But they are certainly helping it along by adding fuel to the bonfire of detailed and widely available information that simply was unavailable during the last downturn. Such is the power of the media. And most of us wouldn't have it any other way.

[Cal]

Martin,

If you believe the media is enhancing the slump then the same reasoning goes for the media enhancing the "boom" so it in essence a net zero effect. In reality the media has little effect on the home buying decision as witnessed by the NAHB study on the matter:

http://www.prnewswire.com/cgi-bin/stories.pl?ACCT=104&STORY=/www/story/11-20-2006/0004478198&EDATE=

"When people are actually thinking about buying a home, they are driven
by the details of how it will impact their family budget and lifestyle and
contribute to their long-term wealth, and that gives them a much closer
perspective on the market than what can be conveyed in news coverage,"
Riehle continued.

[Martin Kane]

Thanks for follow-up to my comment, Cal. I see the news release was written Nov., 2006. At the time, the NAHB's public relations division or hired agency naturally retained a research company to create a reassuring spin on rising housing inventories. You'll note the release includes comment that any imbalance in buyer demand and inventory would be corrected by mid-2007. Like, er, now.

My point is not a criticism of media. As a whole, the media and Internet is doing an excellent job feeding us facts and opinions about the real estate market. It's a cause. And it has an effect.

Let's face it. When a show business figure or politician has a small or large personality quirk, the media reports on it. This creates a new twist on our perception about that celebrity. The media has influence. Period. I tip my hat to the memory of Marshall McLuhan and his coining of the expression "the media is the message."

As I stated before, with that power, they are an unwitting accomplice in creating our opinion and perception about the real estate market. Complaining about this, as certain realtors did, iis tantamount to complaining about freedom of the press. Peter Vile's decision to run this particular post is exactly about this freedom. Thank goodness we have it. But it does tickle our perceptions about the market that much more. So be it.

[ak]

A 53 percent appreciation on home prices is pretty impressive.... especially when you don't own a home and are on the outside looking in.

The only problem with comparing home price appreciation with stock market idexes is that people don't buy houses with 100% cash like they invest in the stock market.

If someone bought a home in 2002 with little down and made payments, they probably invested very little cash. So if they sold their house and made $300k, it is probable that they made 500 percent on their cash investment.

Very few people buy stocks on margin and only a small percentage of Americans even invest in the stock market outside of kicking in a couple of bucks in a 401k plan. So, realistically, the only way that many Americans will get rich is off of appreciation in their home. Now, just like the stock market, anyone who made a killing on their home has to be smart enough to sell it right before the bubble breaks and buy another one at the lowest point in the market. Good luck timing that!

[jdj]

Uh. So by your logic Iraq is going badly because of the negative media coverage. If only we didn't know about the horrible things going on then we could all be happy.

[bobbyj]

The pen is mightier than the CDO?