Ken Shepherd of the Business & Media Institute writes that recent coverage in the business media about a “chill” in the housing market overstates the issue.
Shepherd wrote, “As the media front-loaded their stories with a pessimistic outlook on the housing market, they buried or misrepresented the actual data.
“According to the National Association of Realtors (NAR), the real estate industry group that calculated existing home sales, overall the median price of homes went up nationwide by 0.9 percent over July 2005.
“What’s more, as NBC’s Kevin Corke conceded at the close of his otherwise negatively slanted story, analysts ‘say those who purchased a home at least three years ago could still reap a hefty profit if they sold their place, just not as big as before.’
“The media’s spin on the new numbers fails to put home values in perspective, an NAR spokesperson who preferred not to be identified told the Business & Media Institute.
“‘Sensationalism often sells. We’re still looking at the third-best year in housing history,’ the NAR official told BMI. ‘Coming off of five years of strong sales, you can’t sustain that forever. When things start normalizing, it’s easy to compare to the best year ever, to say the sky is dropping.’
“The NAR spokesperson went on to caution that while ‘all real estate is local,’ about ‘a third of some local markets’ in the most recent home sales reporter were ‘actually expanding,’ thanks in part to interest rates that are ‘still historically low.'”
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Chris,
There is always pile-on, and in this case the press, in general, was pointing out the bubble a year ago -- back when they were being fear mongers. I supposed we could do a better job pointing out markets that remain strong; even then, with this economy, they are likely to follow down just as they followed up. My problem with the NAR is that they are generally spinning positively. Interesting to note: I've written my share of housing columns and I've yet to hear from people telling me how good their market is.
I was around during the last run up..1980's and early 1990's. At that time I had no clue that Real Estate could actually decline. The licensed Realtor acted as if there was no tomorrow, prices would always go up. I believed it and withdrew 65K from my 401K plan (1989) and lost all of it and then some when I was forced to sell the home 6 years later( job reduction, layed off )I even obtained my Real Estate License thinking to make some of the loss back.
Now, 10 years later, we still have not gotten back in the R/E market. I am now a fully licensed Financial Advisor and I can't believe how un-regulated the Real Estate Industy is including Mortgage Brokers and Reps. They can say anything they want regarding the ups and downs of the Real Estate Market(take the commission and run)..but yet as a Financial Advisor I must be very careful what I say, do and must show past performance for All Investments offered.
Of course,what really did fuel the Real Estate Market up-surge besides the Realtors and Mortgage professionals. The low, low discount rate from the FED..this gave the opportunity for the R/E industry to go out and tell everyone to increase the values of a home to increase the commissions and of course the lenders were right there with them with every type of loan for any purchase and re-finance for everyone (no income required). Neg-Am loans, Interest only, variables, 40-50 yr loans, anything, as long as the sale/re-fi closed.(more quick commissions)..now all of the home buyers and re-fi customers who believed the R/E folks are wondering, WHY did this happen?..did the FED start this? greed is everywhere..
Next time the FED cuts the rate, the FED needs to look at who or what industry will be there to take advantage of the lesser knowledgeable and be concerned that prices can and will double, triple, etc, etc..(bubble theory)
Sure, the lower rates helped the economy but actually hurt the housing industry in the long run and the people stuck in a home and payment that put them into further debt and worry..Let's clean up the R/E industry as the SEC keeps a mindfull eye on the Investment Companies of America.
Thanks Ken:
Well said, too bad you can't get this published in Reuters, Wall St. Jounal, etc. But since Dow Jones owns em all and this goes against their current agenda, probably not going to happen. Once again, thanks.
Hi Brad: You withdrew 65K from your 401K plan and your a financial advisor. In the future you may want to put the money in an account with the below and save the 10% penalty and the income taxes on it. Personally, I have never lost a dime on homes I've owned, in fact, I can at least double my money on my existing home I bought in 1998 for 300K. http://www.pensco.com/fees/Unlimited.asp
If I recall correctly Mr. Greenspan started all of this bubble theory stuff the same guy that asked the question, that depends on what you mean by "is". Concerning the FED bringing about the housing situation. I beg to differ, people, in this country are responsible for their own financial decisions, whether it be cars, houses, credit cards or whatever. If the fed caused the housing problem they must be responsible for the car industy the credit card industry, etc. etc. Unless you are advocating we move to a more socialist type of Govt. Concerning the types of loans lenders made, those same lenders are responsible for the decisions they make. I didn't hear anyone whining about it when things were going good. Concerning regulation of the Real Estate industry. Lets see here, are you actually advocating that the Gov't step in and regulate the terms and conditions under which I can buy a house ? Maybe they should regulate the groceries I buy too. Oh, I know, maybe the could regulate when I can go on a vacation, or better I wish they would regulate what I can write.
Concerning the SEC keeping a mindful eye on the companies of america, what turnip truck did you just fall off of ? Which part of America do you not understand ?
Herb:
As you comment on Novastar, you have yet to comment on their ever changing organizational structure. Last week, Dave Pazgan, their once top salesman who in 6 yrs is the CEO (dont really know how that ever could happen), removed his 6 regional vice presidents and eliminated any support given to their field sales people. They are now focsing on buying "correspondent type" loans from mortgage brokers at increased costs to "feed the reit" as their down the street wholesale business is down to approx 400 million per month from 1 billion per month in Aug 2005. In addition, over 600 employees have left in the past year due to mismanagement and a poor corporate culture driven by Pazgan and Anderson.
Time that these real stories are finally uncovered.
First of all, I am a huge Herb Greenberg fan. If he worked in New York, I would quit my job in the hedge fund industry and work for him at a discount to my current salary.
Second, I am glad that Ken Shepherd and his Pollyannaish friends are out there in the market. I mean, someone has to take the other side of a trade. How can you (short) sell a stock if their are no bids? It would be much harder to make money as a trader if there were no Ken Shepherds out there.
I think I remember an article that Ken did on Global Crossing in Sept 2000 on how the media were playing up the "dot.com crash". (just kidding) - but I seriously remember Jim Cramer pumping the dot.coms even as they peaked and started to crash and burn.
You can be a smart bull and a smart bear, but permabulls are nothing but cheerleaders and hacks.
"You can be a smart bull and a smart bear, but permabulls are nothing but cheerleaders and hacks."
You won't find disagreement from me there, but you have to admit at times the media has a reverse Pollyanna syndrome, particularly the past five years with regards to the economy.
I'm in favor of the media bringing out the bulls and bears and letting the viewer decide after hearing both sides. BMI's research has shown, however, that the media strongly favor the more pessimistic of projections and fears among economists and market watchers.