Is the Sky Really Falling? or are Journalists Simply Trying to Get Published?

It's been fun to watch the news recently regarding the real estate market, among other topics and then contrast what I see with blog posts on AR. Something doesn't add up. Journalists seem to be crying, "the sky is falling" while agents express that we are simply returning to a normal healthy market. Sure, inventories have climbed, prices are settling some, and buyers are skittish, but only a bit. Recent news coverage has likely done more for any slowing of the market than any other factors.

"We're on a bubble - watch out, it's gonna burst!" The headline: On housing front, it's beginning to get ugly and Weakest home sales since '03 hit valuesI think many agents are experiencing a slow down from recent red hot years. Does that mean a bubble will or has burst? In fact, if there wasn't so much negative spin in the news arena wouldn't the market likely chug along at a more healthy rate.

"The sub-prime loan market has gone to pot - run for cover!" The headline: Housing advocates warn of default ‘tsunami'The reality: "So the most serious damage is confined to a fraction of a sliver of the overall mortgage market. Christopher L. Cagan, chief economist at Santa Ana, Calif.-based First American CoreLogic, projects mortgage defaults of about $300 billion through 2010, just a flea on the nation's $10 trillion housing elephant. And about two-thirds of the losses will be recovered when lenders repossess homes." Sure, some people lost their shorts because they didn't protect their business but those issues happen all the time when businesses make unsavvy decisions. And, much of what is lost will be recovered. Why does the press feel the need to magnify the sub-prime issue? to get a story run? Address the issue, fine, but tsunami?!?!

"Inventories at an all time high - to the bomb shelter everyone!" Who hasn't seen the headlines?

"Buyers are few and far between - dig in and wait it out!" ...and more headlines...

I don't mean to take lightly some of the events affecting what is going on in the market along with interest rates changes. We have seen an adjustment - common to any market. The stock market oscillates, the money market oscillates, the price of gasoline/oil does (check out the oscillations in Las Vegas gasoline prices (see bottom graph) - bet we see a down turn soon), and so does the price on a heifer. And then, we get titles like these: How much higher can stocks go? that cause a little fear and people start reacting. Of course there are fewer home buyers than months ago. They are scared to death every time they open the newspaper.

A recent article in our local news paper showed the title: "COMMUNITY BANKS: Bad-loan percentages climb - Housing-market downturn linked to rising count of past-due lendings." Later, in the same article the content: "So far, net loan losses remained too small to measure, the FDIC said. "We're coming off a historic low (for bad loans)," Jamison of Community Bank said. Therefore, he said, any uptick looks bad."

What!?!? So, what is the big deal? People are scared out of their britches over something that is "too small to measure"? Sounds like there is barely a story there.

An interesting side to this journalism manipulation is that wise investors are in tune with the news before it is released. An investor recently mentioned how he made considerable amounts of money in the stock market. He focused primarily on the activities of large funds who, for a large part, control the oscillations of the stock market. He watches for their trends and makes his move just before the upswing or downswing in the market (it takes time for these huge funds to make the transactions). These huge funds can create news at the right time and they make their money on the reactions of emotional investors. They buy low and then the news is released about how much stock a group bought so investors (in this case, driven by greed) want in on this "great stock". Buyers buy and the wave rises and the fund manager makes his money. Near the top of the trend, the fund manager sells a ton of shares. Investors (driven by fear) now sell like crazy. The fund manager already had his stock sold (likely for a profit). The stock trends into the trough and the manager repeats the process.

Obviously, there is a lot more detail to this stock market process but the point is that the news about a purchase or sale creates the waves. Participants move on greed or fear and the wise make the dough.

News affects the housing market greatly too. Journalists put their spin on their story and cause emotion. In recent history, I feel the negative press about our industry has been more exaggerated than reality would show. I'm glad every time I make a post to AR about some positive market event to see others support the idea with their comments. And, when I make a negative post about the market I get, "Uh, the sky isn't falling" from several commenters.

I am also finding that the authors on AR blogs can make a stir in the market. I think we can be responsible journalists in presenting a realistic view of the market while we help ourselves and our clients by also presenting the positives. Journalists who must await approval from an editor before a story gets published don't have the freedom to publish as we do in a huge network that draws so much traffic. With the ease of internet publishing it will be interesting to see where people get their news in the future, from thousands of realistic/positive real estate professionals or from newspaper journalists trying to get published writing whatever stirs the pot.

Happy blogging!