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Is the media to blame for US housing market problems?

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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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d_oush

This whole comparing vancouver to the US is rediculous. I'm seeing more and more of it lately, but there's no sense to it. We are a city in Canada, and in no way should we reasonably be compared to an entirely different country.It is irresponsible to give people the impression that what happens in the USA will happen here, there's no reason that it would.

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d_oush

sure, sure, but this isn't the US is it? And they don't have the same effects that will increase property value that we do.

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Anonymous

What I find incredible is that this is the first RE crash that Vancouver has had advance warning of. I am talking about the US of course. Any informed person has known that the US has been going down for a year now and has had ample time to sell in Vancouver. And yet people still buy.I dont see any reason for a bust though.The very same reasons there's a bust south of the border, fella.

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Freako

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.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

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wannaget2calgary

"I just think that the media plays a part in the word of mouth"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 ;-]

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wannaget2calgary

"I've heard that 'sell in 2009' thing a couple of times before… If thats any indication of an overall strategy we could be in for a baaaad market in 2009"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.

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Anonymous

Johnnyrent: I agree that word of mouth is probably the strongest ingredient in the whole thing, I just think that the media plays a part in the word of mouth.And what with the muddy water right now I am feeling kind of 'thursty'

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digi

I've heard that 'sell in 2009' thing a couple of times before.. If thats any indication of an overall strategy we could be in for a baaaad market in 2009.

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wannaget2calgary

johnnyrent wrote "Most of us come to more informed conclusions about RE prospects than the rank and file."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."

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johnnyrent

Of course I meant "thrust", not "thurst". JR

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johnnyrent

AnonymousPoint 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.

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Anonymous

ok Johnnyrent, but where does the pack get the information about which way to run?I think the media does play some part in the cycle.

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johnnyrent

Remember that no one ever lost an election or went broke by under-estimating the intelligence of the average citizen. 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.

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dingus

Sorry, I thought readers would take the next step and think about the self-limiting nature of each of the elements I cited. But good old Pollyanna d_oush needs someone to lift the scales from his eyes. – 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… Read more »

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d_oush

dingus, I think you've outlined many reasons for the boom, but then you claim that there will be a bust, even giving a timeframe.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.

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dingus

The great property bubble and bust of 2003-2009 will be a great topic of study one day. I think it's a much more significant issue than the dot bomb meltdown (or at least the kickass final chapter of a ramping series of postwar credit boom/busts). 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… Read more »

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wannaget2calgary

If every house were FSBO it would make no difference.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.

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Anonymous

Answer: it's the buyers, stupid.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.

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Anonymous

D_oush, I think you're quite wrong. Who's responsible for artificially inflating our RE market? Think it over.

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bc_cele

Anonymous said… 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.

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Anonymous

I agree! VHB is to blame!If you cry 'wolf' for long enough eventually one is going to come along and eat you up!

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wannaget2calgary

I said "Blogs are replacing news media for reliable news reporting."VHB said "Clearly I, VHB, am fully to blame for any bad things that may happen to Vancouver's RE."Complementary statements.

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Van Housing Blogger

Media schmedia.Clearly I, VHB, am fully to blame for any bad things that may happen to Vancouver's RE.

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Anonymous

"Blame"for what by this ain't you fall into wrong direction.Hey people there is all going well in Vancouver despite lots of negtive approach from "NO"people prices are steady and strongly merging forward in november its UP 19% what you guys always talk about comon beleive it today or you never did nor you going to because what we are all walkie talkie people nothing to do with real.Still wait till jan update than beleive okeyh.

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wannaget2calgary

"If you blame these people you have to blame buyers too, which means everyone is to blame, which is the same thing as saying no one is to blame."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!!!

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