Is the media to blame for US housing market problems?
There’s an interesting article in Newsweek about US real estate woes. The National Association of Realtors just had their annual meeting and the mood and topics up for discussion were decidedly different from last year. One of the topics discussed is the difficulty in predicting how hard of a crash the US housing market will experience:
That uncertainty stems from the fact that the current housing slowdown isn’t like the more typical real estate busts of the early 1980s or early 1990s. Those downturns followed a traditional pattern: mortgage rates rose, job growth faded and the economy weakened, pinching people’s ability to buy homes. Today, in contrast, mortgages are still near 45-year lows and unemployment is down, yet many buyers are reluctant to make offers. Lereah attributes this to high prices reducing the number of people who can afford homes, falling demand by investors and the public’s psychological shift from celebrating the boom to worrying about a bubble. Those forces make this slowdown an anomaly, which makes it hard to predict where things will head next. Says Lereah: “You’d have to go back to the Great Depression to find a housing period that is this unique.”
The Great Depression? Geez, thats encouraging. So if it wasn’t rising mortgage rates or high levels of unemployment that caused the problem, who’s to blame for the real estate slump? The media of course!
..many crowded into the convention center to attend seminars on how to adapt to the slowdown. In nearly every session, speakers spent a few minutes blaming the media for hurting the market. All those headlines about a bursting real estate bubble have a lot of potential buyers really freaked out, industry officials say, which is one reason they’ve begun running full-page newspaper ads reminding would-be sellers that despite slowing sales, conditions aren’t really so bad.
So if you work in the media in Vancouver, please take heed: The future of our real-estate market is in your hands. If you run any stories reporting negative signs in our condo market you very well may destroy our economy.
But you don’t really care do you? And why don’t you care? ..because you’ll be making money selling ad space to realtors telling everyone everything is going to be ok.
You greedy bums.. How could you?!
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November 16th, 2006 at 11:45 am
I was licensed in Nov.05, did really well until July 06, and now…nothing. My buyers cannot afford the cost of HO insurance! In Slidell, there are homes just sitting on the market for months-price reduction after price reduction. We’re talking price reductions of 5-10k at a time! I can’t survive like this. I’m going back to work as an LPN.
November 16th, 2006 at 11:46 am
November 16th, 2006 at 11:58 am
Who else is to blame? The RE agents and the greedy investor/speculator (to name a few). I cannot believe people didn’t see this ‘burst’ on the horizon. Look at the affordability and the numbers for BC (I don’t have the link but these numbers have been posted on this blog several times). You have to be a special kind of stupid to think that this could keep going.
When the market turns you will see the speculators and investors jump ship. They have no vested interest in Vancouver. The residents will feel the pain and they’ll move on to the next investment/area. They are the human version of the locusts (plague, thrive, leave nothing and then move on). Unfortunately, most of you fell for the psychology and hype. Now our RE market will suffer.
November 16th, 2006 at 4:27 pm
I think the media has an important role to play in the economy too, they just need to be aware of the way that they can influence opinion. I think they are way too focused on bad news because thats what sells papers.
November 16th, 2006 at 5:54 pm
November 16th, 2006 at 8:23 pm
I asked a few days ago what was the difference between the Vancouver Sun and Real Estate Weekly, the answer being that Real Estate Weekly was free. Perhaps a bit unfair to the Sun, but only a bit.
The media are biased, plain and simple. Some are biased the way I like, some are biased the way I don’t like. Newspapers: fluff, un-news, boiler plate, wire feeds, births/deaths, community events, local propaganda, real estate and auto ads, and a few jobs and rentals. Not much of real substance. TV Networks: self-promotion with cool logos spinning on the screen, sound effects, dramatic voices, multiple arrays of monitors stacked together so you can see the same image in multiple copies (in the background), wires attached to peoples ears &c, all in all like a badly done rock concert, but with a “serious” script being read by people who take themselves too seriously.
Blogs are replacing news media for reliable news reporting. Possibly, once the Great Global Housing Bubble Burst 0f 2006-2009 has run its course, blogs will play a role in preventing future outbreaks of stupidity on a global scale.
Nah, just dreaming, I always was a dreamer.
Now as for realtors, do you guys really believe the stuff you say? For those of you that do, did you think to ask searching questions of the person who brainwashed (trained) you, or did you just have visions of sugar plums dancing in your heads, as you stood awe-struck with your mentor’s wisdom? Why can’t you just be straight with people? Enough of the double-speak. Housing isn’t business, it’s people’s lives.
November 16th, 2006 at 8:26 pm
Oh, c’mon, if misbehaving kids try this line on you, do you buy into it? Nice try! Oh, I’ve got the giggles now, just too funnnny!!!
November 16th, 2006 at 8:50 pm
November 16th, 2006 at 9:12 pm
Clearly I, VHB, am fully to blame for any bad things that may happen to Vancouver’s RE.
November 16th, 2006 at 9:23 pm
VHB said “Clearly I, VHB, am fully to blame for any bad things that may happen to Vancouver’s RE.“
Complementary statements.
November 16th, 2006 at 9:30 pm
If you cry ‘wolf’ for long enough eventually one is going to come along and eat you up!
November 16th, 2006 at 10:39 pm
I agree! VHB is to blame!
If you cry ‘wolf’ for long enough eventually one is going to come along and eat you up!
This is flat out, one of the most idiotic things ever said, anywhere. VHB’s best day was ~10K hits, do you think this even compares to the MSM? Moreover, this really misses the fact that if the RE industry shills are correct then there is no wolf. The world will live in harmony and everyone will be happy, at least if you aren’t renting.
Get a life.
November 16th, 2006 at 10:54 pm
November 17th, 2006 at 1:04 am
Nobody has to buy a house or condo and pay twice the payments for renting the same place.
Sellers have no control over the market. Not even the developers.
And it’s not the realtors. If every house were FSBO it would make no difference.
November 17th, 2006 at 9:04 am
Simply not true. The average seller doesn’t have the verbal skills and possibly not the moral disposition to complete what would normally be an extremely difficult sale. Think of the incredible debt burden the average first-time buyer has taken on … they’ve agonized over the decision, and they’ve had to abandon reason and good sense to go through with it.
The transactions we’ve seen have required sincere-looking smooth-talkers with well-rehearsed and oft-repeated clever scripts. These people are backed up by a system that includes CMHC, the MSM, and the banks functioning as cheerleaders.
November 17th, 2006 at 9:06 am
So many drivers that it’s hard to list em all.
- Obviously central bank policies, particularly the Fed that wanted to avoid consequences from the 99/00 crash and 9/11 and kept *real* rates in the negative for a sustained period.
- A global economy and political system that defaults to the US dollar as a storehouse of value, allowing current account balances to get crazily unbalanced. Which supported the dollar and USD denominated debt, which allowed junk credit to multiply, which allowed the most profligate consumers in the world access to cheap money to buy crap which developing nations could employ their citizens to make, which resulted in revenues that had to be stored somewhere, which ended up being US debt, which allowed…etc.
- National and even global arbitrage in real estate — speculators running from locality to locality, and nation to nation in search of properties to flip.
- evolution of developing nations economies, creating more affluent investor class in developing economies, which sought out refuges for profits /opportunities for investment in the global property markets.
- Demographics that saw three generations of demand (boomers who never say no to trading up, gen-x kept out of the market by the depressed economy of the early-mid 90’s and general risk aversion inculcated from living through some hard times who finally came into their own, gen-y who believed property ownership to be a slamdunk and a no-lose proposition)
- hangover from 90’s underinvestment in infrastructure and housing
- increasing rates of urbanization pressuring demand in many cities
- cultural/political evolution — we’ve come a long way from the 60s - 70’s values of communalism, utopianism, collectivization to the growth of the ownership society. Owning is a hallmark of citizenship.
- cultural/psychological values around homes. Home is valued as a refuge from a harsh world. It is seen as a requirement for family –it is seen as providing the emotional framework for family that perhaps gen-x and gen-y saw as lacking in their own homes. Add relentless marketing around home and hearth stuff, and you create truly incorrigible demand.
- Finally, the age-old constant of the madness of crowds in spiralling markets who have access to a lot of credit.
November 17th, 2006 at 9:47 am
I dont see any reason for a bust though. Your own argument seems to agree, people want to own homes and there is lots of demand.
November 17th, 2006 at 10:41 am
- rates: created inflation and are now being balanced by higher real rates to slay the inflation dragon. Took on a killer mortgage on the assumption your payments would never go up? Sucker.
- global imbalances: unwind eventually. A revaluing of the Yuan, for example. Or a run on the USD (which sideswipes the CAD) as investors lose confidence. Given current account, trade and budget deficits, it seems likely.
- National and even global arbitrage in real estate: to the extent facilitated by a credit bubble, watch that evaporate, particularly as “false” supply is revaled to be what it is. Ie. ghost towns in the desert etc, with no local demand to support prices.
- evolution of developing nations economies: again, to the extent facilitated by global imbalnces and the credit bubble, this “hot” money will do what “hot money” did to the currencies of Argentina and Thailand — bail at the first sight of risk.
- Demographics: demand has been borrowed from the future.
- hangover from 90’s underinvestment in infrastructure and housing: housing supply has caught up in a big way, to the extent of oversupply.
- increasing rates of urbanization pressuring demand in many cities: there may be a pendulum swing back as noveau riche / retirees may cash in equity and downsize to cheaper ex-urb markets
- cultural/political evolution: hard to say. Maybe a pendulum swing back as lmitations of neocon views revealed? The US midterms any indication of that?
- cultural/psychological values around homes: as true price and the folly of this dream is revealed, consumers will get tired of this, as they do every trend.
- The madness of crowds: how much do tulips go for now?
November 17th, 2006 at 11:58 am
Those of us with a keen interest in RE conditions, vested or otherwise, follow trends and statistics closely. Most of us come to more informed conclusions about RE prospects than the rank and file. We are, however, very much in the minority.
Lemmings drove prices up beyond all reason and they will also lead the reverse charge. The MSM are in the middle of this pack; they are in no position to lead it in either direction.
November 17th, 2006 at 12:34 pm
I think the media does play some part in the cycle.
November 17th, 2006 at 3:28 pm
Point taken, the media is one source of information for the pack. I think a more powerful source, other than the realization that your house is sitting or you’re not competing against other bidders and have a lot more choice, is word of mouth.
We’ve all heard the adage that once everyone starts talking about real estate, things are likely out of whack. I suspect that the prime subject will continue to be real estate but the thurst of conversations will change.
November 17th, 2006 at 3:30 pm
November 17th, 2006 at 3:58 pm
And the rank and file just don’t want to know about anything other than their own beliefs. My brother is making a big decision relating to his house. When I tried to discuss various issues of the housing market (both bearish and bullish), he kept repeating his mantra “the market will continue to climb until 2009, then I will sell.”
November 17th, 2006 at 4:08 pm
November 17th, 2006 at 4:10 pm
And what with the muddy water right now I am feeling kind of ‘thursty’
November 17th, 2006 at 9:03 pm
I equate the “sell the minute before everyone else does” strategy with jumping up in the air the second before a free-falling elevator or aircraft hits the ground. I don’t think it’s going to work.
November 17th, 2006 at 9:18 pm
By word of mouth, “in” knowledge becomes trendy knowledge becomes almost-common knowledge, which is then picked up by the MSM as news, which in turn becomes common knowledge. Word of mouth plays a key role here. Blogs are important substitutes for word of mouth … indeed my view is that the market can be swayed by bear-ish views posted on blogs. Some bulls also believe this, which is why they visit here and sometimes get so excited.
Maybe ;-]
November 18th, 2006 at 1:38 pm
Mythbusters very clearly showed the futility this. Buster, their crash test dummy has survived everything from being blown up to falling off a highrise building. But the elevator jump did him in.
link
November 19th, 2006 at 7:21 am
I dont see any reason for a bust though.
The very same reasons there’s a bust south of the border, fella.
November 21st, 2006 at 4:52 pm
November 21st, 2006 at 4:54 pm
It is irresponsible to give people the impression that what happens in the USA will happen here, there’s no reason that it would.