Media Hype?

Posted by: Toddi Gutner on March 31, 2006

While helping my colleague Peter Coy report for the week’s cover story on Buyer(and Seller) Beware: How to Navigate An Anxious Housing Market, I was stuck by the number of realtors I spoke to who were convinced that the cooling housing market was partly due to the “overblown, media hype.” One realtor from Northern New Jersey lamented: “If the press wouldn’t make such a big deal about the changes in the market, maybe the consumers wouldn’t be so reactive and the market wouldn’t be turning.”

As a member of the media, I admit we’re always hungry for an eye-catching story, especially in this voracious content-eating new media world. But, hey--it’s not like we make the statistics up. We just report them.

When new home sales drop, inventory of unsold homes goes up and median home prices fall, it isn’t hard to connect the dots and report that the housing market is headed for “a decline of several years that gradually brings back values to the long-term trend,” as Michael Mandel points out in the cover story commentary.

Some of these realtors I spoke to were looking to blame the inevitable cyclical nature of real estate on something. Many of them are coming off their best year ever in the residential real estate business, but they seem to have forgotten that like stocks, real estate goes up and down. When business gets tough, that’s when it is time to start thinking out of the box and get creative.

Reader Comments

mike

March 31, 2006 1:40 PM

i think that the media contributed some to the frenzy on the way up, and that it might exacerbate it on the way down, but ultimately the coming downturn is largely due to fundamentals, and would happen with or without the media's help.

Anonymous

March 31, 2006 4:02 PM

Great point, and I thought that article was great - an interesting read.

It's an American disease - blame someone else. Don't forget the other illness, greed. I'm not surprised the realtors are looking for someone to blame, but I say keep reporting. I am less concerned about a realtor being able to afford a 2007 Camry instead of a 2007 Mercedes than I am about the average person being stuck with a mortgage worth more than his home.

The fact is, the realtors were completely happy that you report on the booming market but now that things aren't going their way, it's nothing but b-tching and moaning.

Leonard Steinberg

March 31, 2006 10:19 PM

Different media outlets have written differently about Real Estate, just the way they write about Brad and Angelina....some of it is sane and accurate, and most of it is tabloid and sensationalist. The media has been warning of a bursting bubble since 1997. A bubble that bursts leaves little or nothing besides drops of soap.....just like many of the internet stocks that de-valued to almost zero. (The good ones are doing quite well actually) Those who have bought real estate to live in as opposed to those who have speculated should be just fine. The media did selectively choose stories hyping the exaggerated aspects of the booming market (bidding wars, camping in front of sales offices of dreadful new condos, etc.) Now they are choosing selectively those stories that confirm their theory of a plunging market. These extreme stories make for great sound bites and headlines (that sell newspapers and magazines)but do not reflect reality. Real Estate comprises bricks, steel, concrete, glass, etc...not soap! Just like Warren Buffect selectively picks stocks based on value and good old fashioned principles, those who have bought real estate applying solid principles now own quality real estate, not some of the generic, ordinary or over-hyped real estate. Yes, prices will fluctuate through cycles, but quality will always survive and thrive. Inventories have risen sharply from un-realistically low levels of inventory. Anyone whoever thought real estate was a gambling vehicle may now be punished, and should keep their dreams of overnight riches to the confines of Las Vegas or Atlantic City. And all would be much better off in the future doing their own thorough research (with a solid broker)than relying entirely on that which they read in the press....

CA renter

April 1, 2006 2:41 AM

Agree with the other posters. This market should have turned 2 or 3 years ago (at least in So Cal). I think the media hype on the way up is what got us in such a mess to begin with. Everybody was reading about the twenty-something bartender who was making millions in just a few months by flipping houses. That couldn't last forever.

The market is turning due to the fundamentals. The future (even the foolish and unqualified) buyers were already sucked in during the past few years. Now, all that's left are the TRULY qualified buyers, and they're not going to let their REAL money compete with the Monopoly money of the "what's the monthly payment on a no-income, no-asset, neg-am, 103% LTV, 50% D-T-I ratio" crowd. Real buyers have something to lose, and only want to compete with other buyers who are in their same financial position (high down-payment, good income, excellent credit). When the tight credit market returns (and after the high-risk borrowers are shaken from the market), the qualified buyers will return to the market. They understand fundamentals, and will buy when it makes sense to do so again. In many places, this will require a **minimum** of 40% off current prices. We have a long way to go.

lisoosh

April 1, 2006 9:01 AM

Poor poor realtors, having to work for a living. My heart bleeds.
But wait. Aren't they supposed to work in the interest of their clients? Aren't they also Buyers Agents? Shouldn't they be happy for their clients, the buyers who now have more to choose from and can get a better price? Aren't they Professionals?
Guess we just blew the lid off that racket then.

Joe A

April 1, 2006 7:22 PM

These realtors are in hot water and they know it. The fact is, people are waking up and refusing to buy houses at overinflated prices. The realtors will continue to try to con people with fool's quote like "real estate only goes up" and "there not making any more land" but that fact is people aren't buying it.

Homebuyers here's some advice - check the assessor records of the house you are planning to buy. If the owner has owned it less than a year and his asking price is more than 6% than what he paid for it, he is a flipping the house, and hoping you are dumb enough to profit from.

Homeowners looking to sell should think about cashing out soon. All the insta-investors who are flipping condos in overheated markets right now will be flipping burgers soon.

scrunchie

April 2, 2006 4:19 PM

Some of us realtors have been vocal about the reality of the cooling market for some time now. We're not all (just most) denial, frosted tips and elective surgery. I invite you to check my posts from this time last year. southcocoabeach.com

Wes

April 3, 2006 2:53 PM

I recently had the (mis)fortune of attending a dinner with no less than 6 realtors. What I found out was that all of them were just regular joes' like you and I looking to cash in on the seemingly endless public infactuation of real estate. They were all pretty nice. Some of them did seem like opportunitsts who run from bubble to bubble (day trader in 2000, realtor in 2005).

Last week at the bar I sat beside a realtor who did tell me that the market was in the toilet. When I asked her what kind of decline she expected, she replied "anywhere between 5-20%". It was refreshing to hear a Realtor acknowledge something that has a good chance of happening but then again I'm not a potential client.

Peter

April 4, 2006 10:44 AM

What is most disturbing about the media reporting on real estate is the SELLER bias it has. Why does BusinessWeek feel the need to include two majorly distorted facts in its leading paragraph on the cover story?
Misleading fact #1- "Housing prices have risen over 10% in the past year" That is technically true, but what does a year-over-year number matter in the context of a market that is in the process of a shift? You need month-over-month numbers to give prospective buyers the most accurate view. With such numbers, people would readily see that the top of the market was some time last year and that prices have been DECREASING in the past few months.
Misleading fact #2- "Lennar posted a 34% profit this past quarter" Again, this is not false, but how come they don't mention the following: (1) Lennar is regional builder concentrating mainly in the South and especially Florida, which has its own alternate reality real estate market, and (2) all the other home builders' businesses, which are more geographically diverse and therefore more representative of the real condition of the national real estate market, have been declining recently (i.e., why emphasize the performance of an OUTLIER?)
Shame on BusinessWeek!

Tim

April 5, 2006 8:26 PM

Excellent article/commentary on the market.

How do I believe we are in a bubble market?

71% of our entire purchase transactions we closed in 2005 were 100% financed.

And we are a small independant company (not owned by title, broker or lender--thus, that's why I can get away with disclosing these facts). Just think what the title companies are closing and have closed in 2005.

Tim Kane
Legacy Escrow Service, Inc.
Washington State
www.legacyescrow.net

Frank

May 19, 2006 7:30 PM

It seems clear that there is a major bias with many publications toward predicting a major failure in the housing market.

Too many publications at least in covering housing -- to have a "bad news bias". Good news is boring (and probably does not photograph well, either). This bias makes the world look like a more dangerous place than it really is.

There is also something called "bias by headline". Many people read only the headlines of a news item. Most people scan nearly all the headlines in a newspaper or publication. Headlines are the most-read part of a paper. They can summarize as well as present carefully hidden bias and prejudices. They can convey excitement where little exists. They can express approval or condemnation.

Additionally, there exists word choice and tone bias. Showing the same kind of bias that appears in headlines, the use of positive or negative words or words with a particular connotation can strongly influence the reader or viewer.

Different media outlets have written differently about real estate, just the way they write about Brad and Angelina....some of it is sane and accurate, and most of it is tabloid and sensationalist.

The media did selectively choose stories hyping the exaggerated aspects of the booming market (bidding wars, camping in front of sales offices of dreadful new condos, etc.) Now they are choosing selectively those stories that confirm their theory of a plunging market. These extreme stories make for great sound bites and headlines (that sell newspapers and magazines)but do not reflect reality.

MidAM

September 26, 2006 4:55 PM

I have a couple of friends who are Realtors in MA. Their business is off, but both saw this coming since early 2005 and built that into their expectations. One told me he looks forward to the coming years as it will cull out the amatuers from the business.
The RE Brokers who are now complaining either were in it for a quick buck or are just not good brokers.

David

May 27, 2008 9:18 AM

BORINGBORINGBORINGBORINGBORINGBORINGBORINGBORINGBORING......ad naseum

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About

BusinessWeek editors Chris Palmeri, Prashant Gopal and Peter Coy chronicle the highs and lows of the housing and mortgage markets on their Hot Property blog. In print and online, the Hot Property team first wrote about the potential downside of lenders pushing riskier, "option ARM" mortgages and the rise in mortgage fraud back in 2005—well ahead of many other media outlets. In 2008, Hot Property bloggers finished #1 in a ranking of the world's top 100 "most powerful property people" by the British real estate website Global edge. Hot Property was named among the 25 most influential real estate blogs of 2007 by Inman News.

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