In speaking with professionals in the residential real estate business, I find that many of them harbor hard feelings toward the business press. They feel that one of the precipitating forces of the housing bust was the drumbeat of the media asking in headlines:
"When Will the Housing Boom Turn Into a Bust?"
Some of my friends in the residential real estate world feel that the media treatment of this subject was a self-fulfilling prophecy. That the media, by asking this question over and over in the news (note the text - not if the boom turns into a bust, but when) created anxiety in home buyers which in turn caused them to stop buying -- the result being the beginnings of a bust.
Whereas I feel that the criticism of journalists is a bit harsh (the major reason for the housing bust was the large number of nutty mortgage loans being made), there is something to it.
The thing about housing is that it is a very subjective purchase. And when the media harps on a subject loud and long enough, people get spooked. And when spooked, people modify their behavior and in the case of the housing world, that means less or lower offers to buy.
Journalists don't care about the housing market - and nor should they. It is not their job to prop up the economy. But, where I think there is merit to the criticism is in the grey-area intersection between reporting the news and selling stories.
The media knows what grabs people's attention (and the more attention you have, the more advertising you can sell). If, by way of a simplistic example, the headlines were:
"A Review of the Housing Market and Its Future for Growth."
fewer people would have bought papers, clicked on the story, or stayed tuned for a newscast. And, just maybe, the eventual bust would have been a little more gradual than a step off the edge of a cliff.
I am not sure where the line is between responsible journalism and marketing news. But, at least as applies to the housing crisis, the media may have pushed the process a bit but it was not the cause - and nor will it be the solution.
Jim Randel is the author of the new book, The Skinny On: The Housing Crisis (Clover Leaf LLC) and the about-to-be release book, The Skinny On: Willpower (Clover Leaf Publishing LLC)
An Excerpt from The Skinny On: The Housing Crisis (Clover Leaf 2008)
Follow Jim Randel on Twitter: www.twitter.com/jimrandel
First, the socalled "Housing Bubble" did exactly what the Bush administration needed it to do to temporarily bail them out of the Recession they caused shortly after enacting his tax cuts and starting a war we then doubly could not afford. It propped up the GDP with phony numbers based on wacky mortgage products pushed by Greenspan and Co. when they told the mortgage industry to become "more creative" back in 2004! By churning those mortgages through the system, then securitizing them for an even bigger bang, they made it look like the Economy was just humming along. It wasn't.
And Two, I disagree with this--"(the major reason for the housing bust was the large number of nutty mortgage loans being made)" The MAJOR reason for the bust was the unwinding from the top down of the swaps (insurance) and securitized packages that had leverages over 34 times BASED on nutty loans sold as AAA, but in reality, garbage. When the Pension Funds, Sovereign Wealth Funds, and other wealthy investment groups realized what they had been sold, it all fell apart.
Shouldn't those two be prosecuted? Especially since the pathetic Martha Stewart was?
http://www.quartzcity.net/2006/08/29/100-years-of-housing-prices/
We can see that for the last hundred years or so, the price of housing has stayed fairly consistent, accounting for inflation. Yes, there are drops during the Great Depression and WWII, but on the whole it's never risen above 120% of the baseline established in 1890. Until this boom. At the peak, the average home "value" was at 200% of that same baseline! This was not the press causing the bust, this was the over inflated prices causing the bust. PERHAPS the press made the bust happen a short time earlier than it would have otherwise, but it WOULD have bust!
The media did the world a service by sounding the alarm about the unsustainability of the bubble. If anything, more dramatic headlines printed sooner would have been helpful. But hindsight is 20/20.
Anyway, the graph doesn't show the recent drop in prices. How far have they fallen?
Also, it appears that rather than have home prices fall further, we may get inflation to increase in order to get this graph back to normal.
What do you think?
Numbers don't lie. The people in the industry don't want to take responsibility for the mess they created, so they blame the truth tellers.