Friday, February 09, 2007

Media Spin

How much does the media influence our behavior? Could the negative spin surrounding the housing market be preventing potential buyers from buying a home thus forcing prices down? You bet, according to the National Association of Home Builders (NAHB) who has begun to offer their members a public relations kit. According to the NAHB such a need is obvious, the kit “provides a starting point for public relations campaigns to attract home buyers who have been discouraged by negative housing reports in the media.” Not be outdone, the National Association of Realtors recently authorized a multi-million dollar advertising campaign to promote the positive benefits of home ownership in an attempt to overcome all the negative press regarding the housing market.

The declining housing market has been receiving its share of negative publicity over the last year. However, does a 1.7 percent yearly decline in the median home price nationwide, warrant headlines and prime time commentary about the “housing bust”? Isn’t the constant drumbeat on home price meltdowns pure sensationalism?

Our economy continues to expand. Wages are increasing, inflation is under control, population and jobs continue to move to our region, the Federal Reserve is holding short-term interest rates in check, and home builders are putting on the breaks for new construction. Each of these economic indicators should be a strong signal for a good housing market, yet the financial press and Wall Street pundits continue to project fear of collapsing home values. The economic reality is: if the fundamentals aren’t supporting a market decline, then it’s not going to decline for very long.

Evaluating the true condition of the housing market can be confusing. There are too many variables for the casual observer. A few guidelines may help in keeping all the real estate media hype in perspective.

Like politics, all housing markets are local. There is no “national” housing market. Your neighborhood may be important to you but the media isn’t reporting on the housing market on your street. National, state and county statistics will very greatly. New construction sales numbers are usually not included with the multiple listing resale numbers.

Sensational negative headlines attract attention. “Stay tuned to hear about the doubling foreclosure rates”. If the number of foreclosures increases from one to two, they have doubled. Using percentages can be misleading. “Home prices fall ten percent!” From what? Ten percent from last month or last year? Were the homes in Sacramento or El Dorado Hills? Were they new or resale? I have never seen a news broadcast featuring a family who purchased a home and lived there happily but I have seen several interviews about some poor soul who couldn’t afford his monthly payments and was now having difficulty selling his over priced home.

There are 12 months in a year. Housing sales numbers are compiled and released monthly from many different sources. Sales are seasonal and month to month percentages, not surprisingly, decline in the winter and increase in the spring and summer. Housing trends cannot be forecasted based upon a single month or quarter. A more accurate perspective of the housing market should include historical data for the last five or more years. Real estate values are cyclical in the short-term but consistent in the long-term.

Everyone has an agenda. My economics professor used to say, “figures don’t lie but liars figure”. Statistics are subject to interpretation. Affordable housing advocates will look at the same numbers that the building industry reviews and come to different conclusions. National sales numbers and average selling prices have little relevance to the California housing market. It’s good to question the source of any information provided.

The housing market is going through a correction that has been long overdue after five years of record sales and price appreciation. The issue now is whether that correction will be orderly or disorderly. The media has been portraying it as a catastrophe. Their negative rhetoric has been overdone and irresponsible but their “sky is falling” mantra is finally beginning to loose credibility.

The best source for straight housing information is your local newspaper or your neighborhood agent. Both sources live in the community and have first hand knowledge of the real estate market. Large regional newspapers and network broadcasts can become too dependent on outside national sources and third party analysts for their information. They lack the community connectivity found on Main Street or Broadway. By keeping all things in proper perspective, we can make better, less reactive, and more informed decisions.

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