Misguided by 'media market mania'
Mood of the Market
By Tara-Nicholle Nelson, Monday, September 21, 2009.
I awoke one recent morning to the news of the results of a hot-off-the-presses Pew study: 63 percent of Americans polled believe that media news stories are often inaccurate. Sixty percent feel the media is biased in its reporting, and 74 percent said news organizations tend to favor one side in their dealings with social and political issues.
Call me a cynic, but this public sentiment seems neither surprising nor off-base to me. Keeping in mind that I hail from the San Francisco Bay Area, the land where alternative viewpoints are the norm, I see myself as more of a realist than a skeptic or conspiracy theorist when it comes to the mainstream corporate media and their inclination to slant stories. To my mind, the media is in the business of grabbing eyeballs, which has, historically, been more effectively executed with drama, frenzy and fear than through "all calming, good news, all the time."
I see it as neither bad nor good -- it just is. And if you don't like it, do what I do and don't watch it, or cull your news from sources you find to be less slanted (or at least sources that are slanted in the same direction as your own opinions, which does tend to make one feel pretty good).
But I digress. When I read the new study, my puzzlement was not at the results, but at this conundrum: Since we all are apparently aware that media reports are often biased, why do real estate consumers allow news reports to make them crazy?
I've had a couple of meetings with new clients who evidenced symptoms of "media market mania." One got so worked up just talking about it that I started sweating for her.
Here's how she presented, "Should I buy now? Or wait? I've been wanting to buy for 10 years now, but I decided to wait for the bottom. I started to look at the end of last year, but I kept reading articles that said the market hadn't bottomed out yet. Now I've waited, and all I read about are multiple offers and overbidding -- that's what I was trying to avoid in the first place!
"Oh -- but then I just heard on the news that I should be trying to make sure I close escrow by Nov. 30 to get the tax credit. First they said wait, now they say hurry. I'm not really sure what to do, but I'm going to take time off work so we can just look at, like, 10 houses a day until we find one."
And she was right. Well, not about taking time off work, but about the crazy-making potential of hanging on the media's every word about what to do and when to do it, when it comes to your real estate decisions and moves. The messages can be so contradictory and extreme, from an urgency and emotional perspective, that consumers taking them to heart often succumb to total overload, overwhelm and either panicked, impulsive action or total paralysis (cue scene with first-time homebuyer twitching and drooling into a folder of good faith estimates, complete with fetal position, on the couch, with the news announcer's voice audible in the background).
Unfortunately, the mainstream media's real estate news and advice does not buck the biased-and/or-inaccurate trend Americans have detected in the media at large. (Although this is definitely a generalization -- there are a few beacons of consistently good information and advice out there. An example that comes to mind is The New York Times' Your Money Column, written by Ron Lieber.)
There's no malice aforethought implicit in this, if you ask me. The reality is that real estate markets and, thus, recommendations for how any given individual should best maneuver within them, are uber-local phenomena. A buyer's market in Sheboygan could be (and, in fact, likely is) a seller's market in San Francisco. By its very nature, the national news must generalize, which necessarily renders monolithic real estate advice inaccurate for some of the readers almost all of the time.
And as for bias -- "The Sky is Falling"; "Bubble Has Burst"; "Market is Terrible"; "Prices are Down"; "Foreclosures are Up" -- these doom-and-distress headlines with which we've been bombarded for the last couple years belie the essential dichotomy inherent in real estate, that is non-existent in other markets and asset classes.
The fact is, the real estate market is never "bad" for everyone. Unlike the stock market, where the vast majority of people suffer in a down market (fancy options traders being the exception), a real estate market that is bad for sellers is, almost by definition, great for buyers.
But it's not just buyers who fall prey to this media market mania. You should hear -- or perhaps you have -- the mental gyrations into which this madness propels homeowners. I hear it all the time, usually right after someone asks whether they should "just walk away" from their home.
ME: "Why would you do that?" ...CONTINUED
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Submitted by Ted Jernigan on September 21, 2009 - 1:33pm.
Ted Jernigan
Ebby Halliday REALTORS
McKinney, Texas 75071
Jernigan@ebby.com
972-489-6173
I join you in trying to convince people that what the media says has nothing to do with anything. I post all the time about how local the real estate market is.
I have a son in Ft. Meyers, Florida who is upside down in a nicely remodeled home he bought several years ago. I tell him to calm down. He didn't have plans to move this year. He can stay there quite a while without thinking about moving. No need to panic.
I have a son in McKinney who is very right side up in his home. He really doesn't plan on moving any time soon. Both families will do well in the long run. In both cases, keeping calm is key.
Submitted by DOMINIQUE MELLOW on September 21, 2009 - 1:52pm.
Dominique Mellow
Coldwell Banker
Tampa Fl
I agree with you 100%; mainstay media is encouraging people to default on their mortgages, do short sales and it is a crying shame; accountability and common sense have gone away; while they are legitimate cases due to job losses, when people who are in good financial position just want to stop making their mortgage payment because 1) their friends are doing it or 2) their advisers told them to because they think they owe more than what the house is worth today, that is not an excuse !
We all know the market will turn around, such as the stock market did since march of this year, when by the way doomsday was around the corner, the Dow was going to zero and all the banks were going to be nationalized!!!! Whomever bought Bank of America at $3 is very happy that only six months later the stock is trading at $17 !Same for Wells Fargo and GE which were down to $8 , and have since recovered quite well!
While we may not see that quick an appreciation, all you have to do is look back in the late 80's and the early 90's, we had recessions, we all got out of it; real estate prices came back, and most people who did not go crazy with refinancing and spending all their equity made money.
2 questions I have:
1) who is going to be sued when the homeowners who did short sales or walked away from their mortgage realize the upside potential they have missed? Had they stayed in the house and paid their mortgage as they had agreed, they would not have lost the future appreciation that is going to happen?
and 2) , when you buy a car, and you drive it off the dealer lot, everyone knows it has already lost value and is not worth what you paid for it a couple of hours ago. Do you stop making your car payment and give the car back to the bank? I dont think so , so why would you do that with a mortgage that you took on when you bought your house,w which appraised at the time, if the value has temporary gone down???
Submitted by J. Craig Anderson on September 21, 2009 - 2:58pm.
I agree wholeheartedly with Tara-Nicholle's assessment of the mass media's handling of real estate market coverage -- and I am a real estate reporter for a large daily newspaper. I also agree that the extent to which news consumers buy into the hype seems odd, given the poll results indicating a high degree of skepticism toward the media in general.
I think the reason consumers are more inclined to take their cues from the media when it comes to real estate is the same reason the media tends to give so many bad cues: The real estate market is dauntingly complex and defies simple explanations. The machinations propelling the market forward are so intricate, the variables so numerous, that NO ONE understands why certain things happen, or exactly what's going to happen next.
We do know that, in general, based on history, the market's long-term trajectory will follow certain broad outlines, a predictable pattern of ups and downs. But can you imagine opening up the business section of your local newspaper (or, more likely, clicking on the "Money" tab of your favorite newspaper's Web site) and seeing the same article, day after day, that reads:
"REAL ESTATE'S LONG TERM OUTCOME PREDICTABLE
In general, based on history, the market's long-term trajectory will follow certain broad outlines, a predictable pattern of ups and downs."
Of course not. That would not be acceptable to news consumers. I'd argue that the concept of a long-term cycle should be woven regularly into news articles about the real estate market, but by itself it isn't news. So what you end up with is a bunch of journalists, many of them extremely sharp, some not so much, charged with the task of following the market day-to-day and reporting on each significant twist and turn. Even the best ones aren't going to offer anything better than an ongoing record of knee-jerk reactions to first impressions of events. That's simply what journalism is, and it's the inevitable trade-off for reporting information as it happens.
So why even bother? I guess that's like asking why anyone should bother with exploratory surgery when an autopsy would be so much more conclusive.
Submitted by James Nathan on September 21, 2009 - 3:05pm.
What a perfect example of blaming the messenger for the message when what's missing most often is critical thinking by the reader. One of the shortcomings of the media is that they have a limited amount of time and space to tell a story. They can't add all the qualifiers to every article (i.e. housing prices nationally are down 3% in the most recent quarter but in your town they may be up 2% or down 7%). News reports rely on a kind of shorthand, and readers need to read/view them with a critical eye. No 800 word article can tell you all you need to know about your local real estate market, but it can alert you to the fact that foreclosures are increasing nationally, and this could have implications for your market, too. That's what the news is. It's an alert. It says, "here is something you might want to pay attention to. Here are some details about it. Here is how this phenomenon is affecting a few of your fellow citizens." But to dismiss the media as slanted or inaccurate (and they can be both) is a disservice because much of the time they are neither -- it's just that their reports are limited in scope and thus never paint as detailed a picture as we might like.