Housing Bubble: Did The Media Do Enough?

The Orange County register looks at reporting and the housing bubble. “Gary Watts cites news coverage as a major, depressing market force in his latest outlook. ‘I think the media, in general, needs fear-driven articles to keep readers interested or viewership up,’ Watts says. A bold headline highlighting what Watts sees as minor market trends ‘makes everybody think is this the beginning of the end.’

By any measure, the housing market is struggling. So what should this columnist do when, say, my proprietary economic index shows local housing suffering its worst quarter since 1995?

‘Isn’t it important for the skepticism to take place?’ says investment adviser Charles Rother from Los Alamitos. ‘Housing prices in many areas of California are no longer supported by income, rents or likely employment growth. Maybe we should ask, ‘Did the media do enough?’

Paul McCulley, the top Fed watcher at Pimco bond traders in Newport Beach, summed up the media’s housing pickle best: ‘If some broker is blaming you now, he should also thank you for two years ago. Can’t have it both ways!’

Nobody complained in 2003 or 2004 about frequent reports of all-but-instant real estate wealth.

From The Palm Beach Post: "As the housing cheerleaders constantly reminded us, a plethora of fundamental factors drove the historic housing boom of the past few years. Now that the boom is over, the same cheerleaders point to a single reason prices have fallen: the media."

From The Herald Tribune: "Some Reader Advocate callers aren’t happy with the way the Herald-Tribune is covering the downturn in the real estate market in the area. One woman said that we were killing the housing market by continuing to publish stories about how bad the market is."

Another caller agreed, suggesting that we’re perpetuating the problem by reporting on the decline in median prices.

From The New York Times: "A report today showing that sales of new homes rose for the first time since March was "at first glance" a welcome respite. But economists warned that underneath the headline numbers, signs of a weakening housing market were more prevalent than ever."

Sales figures for July were revised to show that fewer homes were sold than the government first reported. As a result, the August sales data probably exaggerates the resiliency of the market. Economist Stuart Hoffman called the August increase a ‘dead cat bounce.’

The August numbers could also be inflated. Because new home sales are recorded when the contract is signed, not when the deal is closed, the data do not factor in cancellations. Yet builders have said recently that cancellation rates are running as high as 30 percent, suggesting that the Commerce Department's numbers make the housing market appear healthier than it actually is.

"It certainly is possible that for a variety of reasons you could have a one-month upturn, but I doubt that will reverse the trend that seems to be occurring," said Kenneth Simonson, chief economist for the Associated General Contractors of America.

Mr. Simonson noted the possibility that the August sales numbers could be revised downward, just like the July numbers were. "I think we could still wind up seeing that this month is a continuation of the downturn."