Economist's Commentary: April 16, 2008
Media Influence
By Lawrence Yun, NAR Chief Economist
The media has a lot of influence in determining the confidence of homebuyers. True or not, that is the belief among REALTOR® members. In my recent trip to South Carolina, a local association showed me a survey of members which showed that nearly 90 percent of respondents indicated that the media is overplaying the fallout of the housing market and, hence, artificially dampening home sales.
I encountered similar stories from across the country. In Columbus, Ohio, where the median home price is hovering at $150,000 and with no sign of any price bubble, several REALTORS® told me of having spent several weeks with a buyer prospect, driving around and showing homes, only to have them suddenly back out of the marketplace. The client explanation was always the same: "it is not yet the right time - I just read a story of a collapsing housing market." The same was heard be it in Kansas City, Buffalo, Boston or Detroit.
While in Japan last year, I encountered a depressing perspective regarding the U.S. housing market too. Nearly all of the Japanese press I interviewed with were initially relating the U.S. housing market conditions to those found during the Great Depression, with people losing homes left and right. The Minister of Land, who had been seeking to introduce mortgage securitization into the country, asked me about what it is like to experience mortgages disappearing from the market place. Fortunately, after the discussions they all came away with a view - I believe - that the U.S. housing market is not as bad as portrayed as in the media. The Land Minister wants to promote policies that replicate the American market where existing home sales become the norm (about 80 percent of home sales in Japan are new homes, with a high level of demolitions of existing homes). Many were greatly surprised to know that more than two-thirds of the U.S. was experiencing home price gains, as I showed price trends according to OFHEO.
The U.S. housing market is down to be sure - but it is far from out. Foreclosures are unacceptably high and we must seek solutions to mitigate the pain. At the same time, what is lost in many stories is that home prices are rising in half of the country according to NAR data and much more than half of the country and in nearly all rural areas according to OFHEO. Only the very limited market coverage of Case-Shiller price index show consistent and widespread price declines. (Some aspect of the Case-Shiller price declines could be due to a sizable mis-measurement of overly exuberant price gains during the boom). Yet, Case-Shiller price data gets far more play in the national media.
The way consumers hear of the housing news come from essentially the three top national newspapers of the Wall Street Journal, New York Times, and Washington Post, and from the wire stories of Reuters, Associated Press, Dow Jones and the like. Local papers and local TV and radio stations just replay the story that first appeared from the above. Even the national TV stations often report "today's news" based on stories from the big three national newspapers above.
The national media generally tend to be a bit more pessimistic. I do not believe the reporting is purposely pessimistic. It, rather, naturally arises from the many years in journalism where BAD news is considered to be serious newsworthy news while GOOD news is considered as a fluff that is assigned to lower ranked reporters. (I think there is some study that says optimistic people migrate toward the business world knowing their products and services will succeed while pessimistic people migrate toward academia and social work and journalism in order to save the world from so many things in everyday life.)
With this in mind, what can be done? Well, the traditional media has been losing viewership and that trend will continue in the Internet age. People will get more information outside the traditional sources - including from columns like this. REALTORS® are encouraged to use the information with their clients. Share the facts and nothing but the facts, and let consumers decide.
This is one in a series of commentaries by the Research staff of the National Association of REALTORS®. Read more commentaries >
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