Columnist: 'Media Is Wrong About Housing Slump'

Realty Times feature article by Blanche Evans

Why buy a house now? You've been getting bad information. Here's why.

The financial press is worried that they might have gone too far - paralyzing the nation into recession by piling on housing. So they're finally beginning to question the indexes where they get their data, and whether the news is really as bad as it seems. Slowly but surely, headlines are changing from Don't Buy A Home Now to Is It Time To Buy?

We said it here first on Realty Times - that consumers aren't getting the full story. Indexes can be misleading because of the locations, prices, types of housing, and rates of increase they track.

In late April, Robert Shiller, founder of the Case-Shiller Index, announced that there was a good chance housing prices would fall further than the 30 percent drop during the Great Depression.

Shiller has plenty of reason to be negative - he makes money when people buy housing hedge funds, licensed with data obtained through his company Macromarkets LLC.

Now, finally, one brave journalist is writing that Case-Shiller is flawed.

In his story "Home-price data has its flaws," Chris Plummer of MarketWatch slammed both Shiller's Index and the Associated Press for being "grim reapers."

For the first time, S&P Index Committee Chairman David Blitzer "acknowledged his organization's overall and metro-market readings paint an incomplete picture."

No kidding. The index covers only 20 markets, heavily weighted to the most volatile metros in the nation.

Plummer also lampooned the AP for writing that "despite that index's limited seven-year history, home prices plunged by a record percentage at their fastest rate ever."

He also notes, "The glaring discrepancy in this case is that 17 of the 20 metro areas posted record annual declines, and yet 78 percent of the 330 metropolitan regions that the NAR tracks reported price increases ... ."

Bravo, Plummer. But the rest of the financial press still has a long way to go.

When Shiller says home prices are going to fall 30 percent, not one reporter who covered the story asked this simple follow-up question: "Bob, during the worst part of the Great Depression, one in four people were out of work. Our unemployment rate is a little over 5 percent. So what's going to drive home prices that low?"

Instead, no one did even the minimum Wikipedia search to find out what conditions were really like 75 years ago.

What that means is not only are the indexes misleading - the reporting is worse.

Right now we have mortgage interest rates three points below historical norms. We have housing inventories five months greater than balanced markets. Combine that with unemployment that is a half percent lower than the recession of 2003, and you have excellent homebuying conditions.

Stop listening to the media. Go buy a home.

Copyright © 2008 RE/MAX International Inc. 5/6/08