What goes up must come down. When you’re comparing lower prices to record highs, it’s difficult not to see a drop.
Unfortunately, media reports continue to ignore the fact that comparing current housing prices to the past few years’ means comparing to the strongest housing market in history. A dip in existing home sales provided the media with more fuel to fire its pessimistic imagination on the health of American real estate.
“The housing market is deteriorating by the month,” The New York Times’ Jeremy Peters began in his August 24 article. The night before, all three broadcast networks led their newscasts with similarly negative takes on new housing numbers.
But industry experts warn that there’s little reason for the media to clang the alarm bells about a “housing bubble.” Historically, officials at the National Association of Realtors (NAR) argue, the housing market is doing well and trends point to a “soft landing.”
Warning of a “housing chill,” ABC’s Charles Gibson warned viewers of “a record number of homes unsold” with “home prices dropping.” Over on rival network NBC, anchor Brian Williams had even starker language, saying that “The housing market in America has taken something of a dive” as “the number of homes on the market but unsold right now is at a record high.”
CBS’s Bob Schieffer steered clear of alarmist language and even included a story about a young couple buying a home and benefiting from a cooling housing market. But he also found an ominous sign, saying the new “numbers worry economists because they say it could be a sign the economy is entering a real slowdown.”
As the media front-loaded their stories with a pessimistic outlook on the housing market, they buried or misrepresented the actual data.
According to the National Association of Realtors (NAR), the real estate industry group that calculated existing home sales, overall the median price of homes went up nationwide by 0.9 percent over July 2005.
What’s more, as NBC’s Kevin Corke conceded at the close of his otherwise negatively slanted story, analysts “say those who purchased a home at least three years ago could still reap a hefty profit if they sold their place, just not as big as before.”
The media’s spin on the new numbers fails to put home values in perspective,
an NAR spokesperson who preferred not to be identified told the Business & Media Institute.
“Sensationalism often sells. We’re still looking at the third-best year in housing history,” the NAR official told BMI. “Coming off of five years of strong sales, you can’t sustain that forever. When things start normalizing, it’s easy to compare to the best year ever, to say the sky is dropping.”
The NAR spokesperson went on to caution that while “all real estate is local,” about “a third of some local markets” in the most recent home sales reporter were “actually expanding,” thanks in part to interest rates that are “still historically low.”
Five months ago, NAR economist David Lereah also pointed to low mortgage rates as a key reason he believes the housing market is not a bubble ready to burst as many in the media fear.
“You do have an economy that is growing” and mortgage rates below 7 percent, Associated Press business writer Mark Jewell quoted Lereah in his March 20 story. The AP reporter added that Lereah “argues a balloon is a better metaphor than a bubble to describe a market he characterized as going through a temporary price correction rather than a collapse.”
But what about the nearly 4 million homes still on the market?
As Lereah argued in a January 10 press release, “A modest slowdown in home sales, coupled with improvements in housing inventory, means the market is in the process of normalization. That will help to bring balance between home buyers and sellers, yet sales will remain historically strong.”