I confess: I caused the housing downturn

Posted by: Dean Foust on July 31, 2007

overblown_large.pngGo ahead, tell me. I can take it. Am I to blame for the downturn in the housing market? I mean “me” as in “we” as in “we” in the media. Tim Hamby, the president of a Florida company that does PR and marketing for real estate developer thinks so (or at least his developer clients do). Tim and his team at Renaissance Creative have released a line of T-shirts designed to take a playful (?) swipe at the media for sensationalizing the bad news in housing, and for making the downturn worse by spooking the public. (You can see two of the T-shirt designs at right.)

So are we, the jackals of the press, guilty as charged? Some real estate pros think so, according to this article on eFinance. Heck, I remember when my wife and I were buying our first house outside Washington, D.C., and our real estate agent, who was upset about a bearish article in The Washington Post, told me that the local real estate community should yank all its advertising from the Post to punish the Post. That was 1991. And he knew I was a journalist!

So I’d like to know what readers of this blog think.

overblown2.pngBut first allow me to defend my profession: Which leads me to say that this criticism is a bunch of hooey. If anything, we are guilty of not sounding the alarms earlier (although I will point out that I wrote stories two years ago warning of how lenders were increasingly pushing “option ARM” mortgages to qualify otherwise unqualified borrowers, and how mortgage fraud was a growing problem. Maybe if regulators had read these stories….oh, never mind.

Seriously, we in the media are criticized when we don’t unearth and alert the public to scandals in the making (Enron, Worldcom) and we’re pilloried when we do focus on brewing problems. Maybe if the real estate/mortgage complex hadn’t been pushing so hard for growth, the housing boom would have stretched out for much longer, albeit at a more moderate, sustainable pace.

Just to prove I’m a nice guy, here’s the link to order one of the T-shirts, which are $20 each, with all proceeds going to charity. Maybe I’ll order one myself.

Reader Comments

John Schneider

August 1, 2007 12:20 AM

or maybe, if 'the media' hadn't ridden the ride up with so much frenzy, abandon and giddiness-beat beat beat- and the bumpy slope down, with the same unrestrained quest for fantastic-and exploitive- headlines, your tale might be believable

Jim D

August 1, 2007 12:55 AM

Yeah, just like you media people caused us to lose the Iraq war by "not reporting the good news".

Out of curiosity, if RE folks think the media is responsible for the downturn, do they also think you were responsible for the bubble run-up, also? Gosh, they must think you guys are powerful.

:-)

John Schneider

August 1, 2007 9:45 AM

or maybe, if 'the media' hadn't ridden the ride up with so much frenzy, abandon and giddiness-beat beat beat- and the bumpy slope down, with the same unrestrained quest for fantastic-and exploitive- headlines, your tale might be believable

Nick

August 1, 2007 10:09 AM

I think the problem isn't just with one entity. It takes two to tango, or in this case, many to tango.

Yes, the media played up the housing problems, first by being late to the game and then finally catching up. The problem are not the journalists, per se but the editors under pressure from their owners to increase readership. How many times do you see headlines that sensationalize a point? If you actually read it, it becomes relative. The problem is that people don't really read. Most skim the headlines, and some go as far as reading but still can't make out the gist. Of course, there are plenty of people who can read and make up their own mind.

It's a question of critical mass. There are many culprits, land developers, mortgage lenders, Realtors, magazine and newspapers. Finger pointing doesn't solve anything.

However it is hard to find true impartial reporting. In the end, dust settles and hopefully people grow a little wiser. In the meantime, what's up with Spears? ;)

Thanks for this post.

popo

August 1, 2007 11:11 AM

When all the housing industry can come up with is "Shoot the Messenger" they've clearly run out of all other options.

Which can only lead one to the conclusion that it's actually *worse* than the media says it is.

jdj

August 1, 2007 1:02 PM

Well, which is it with these t-shirt marketers? They've got at shirt that says "The Real Estate Bubble did me right!" and one that says it's "Overblown." Oh, as usual the realtorz want it both ways, I forgot.

Brandon W

August 1, 2007 2:23 PM

I'd like to see an inflation-adjusted chart showing the historical price-per-square-foot for an average home over the past 25 years (or more). Part of the reason for the rise in median home price is that the median home has gone from 1300 sq ft to 2600 sq ft in the past 50 years or so. Looking at prices on a per-sq-ft basis would significantly reduce this factor. I do think housing prices are clearly overblown and this will show up more prominently if/when interest rates really rise. The media may be hyping the issue to some degree, but the bubble likely exists in-part because the media hype around it in the first place. The best thing the media can do is slap a long-term graph adjusted for inflation AND square-footage in front of the NAR and demand that they explain it away.

Keith

August 1, 2007 9:58 PM

The media played a role on both sides, by helping to push the extreem. I regularly go to Money.com. In 2005 they regularly ran stories called "Mogul in the Making", which would highlight average joes who were getting rich flipping homes. Then in late 2006 they started running regular articles highlighting people who could not sell, then later people losing their houses. This same thing existed across all type of media. If tell people over and over again that you are fool if you don’t get into real estate, its makes more people run with the herd on the upswing then would have otherwise. Then if you say over and over you are a fool to buy – it helps more people sit on the side lines than would otherwise. So cause it – no, make the high higher and low lower, absolutely.

Jim D

August 2, 2007 2:37 PM

Brandon - The Case-Shiller index does what you want, allowing for the growth in home size, by comparing prices of the same home, sold over time. Doesn't allow for other improvements, like adding a pool, but nothing's perfect.

It shows a parabolic increase in home prices in the last few years.

Eliseo C

August 2, 2007 10:01 PM

I think the media did play a role in scaring the public. The media is a for profit entity and scaring the masses sales they well continue to do so. I agree that media had nothing to do with what greedy Wall Street Investors, Ignorant Greedy Loan Originators and Ignorant Consumers were doing while the housing boom was happening. However, the media has a big influence the psychology of the masses. The media can either make us or brakes us. That is my opinion.

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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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