Thursday, December 20, 2007

Media Bashing and the Real Estate Market

Special to the Deadline Newsroom
© 2007 By Dena Kouremetis

As a regular media contributor to real estate issues for consumer consumption, I know I don't have to go into statistics to make my point on this topic. Numbers about the real estate "depression" are screaming off every page of every newspaper across the U.S.

As a member of both the press and the real estate industries, however, I feel I must express myself regarding the accusation that it's the media that is breaking the backs of the average Realtor.

Wherever I go I hear agents lamenting the "bad press" being doled out that is making consumers terrified of buying or selling homes until the "slump" is over.

I wish everyone would just take a moment to ponder a few things.

The press reports the news -- which means anything NEW happening in any industry. If homes in Indiana, for example, have not suffered through foreclosures or depreciation from the housing and lending debaucles, that means that it's business as usual in Indiana and no news is good news. Why should it be reported?

Real estate professionals may be held just as responsibile for the current sub-prime fiasco as lenders, since their role is to be an advisor as well as a representative to their clients. Why?

• Real estate consultants are the ones who must at all costs, point out the small print to their clients that the lender may gloss over in explanations.

• Real estate consultants are the ones who can advise and disclose, by questioning their clients, if they are about to get into an investment that is way over their heads.

• Real estate consultants are the ones who should be painting worst-case scenarios for an adjustable rate loan's monthly payments. What if the house DOESN"T appreciate? What if the borrower's income DOESN"T go up? What if their credit scores are not enough to permit them to refinance when they have to?

I may be thrown under the bus by a lot of my peers for writing a piece like this, but it's like the sound of fingernails scratching a chalkboard to me to continually hear people maligning the press for what is happening out there. Real estate professionals gleefully collected milions of dollars in commissions in 2004-2005, when multiple offers were rampant in many areas. But when they knew their clients could barely afford the monthly payments on these homes, I really wonder how much counsel they offered to the people who made those commissions possible.

At the time, the real estate industry was clamoring for creative financing so that people who made average incomes in places like the San Francisco Bay Area could buy million-dollar-plus homes, obviously betting on fast apprecation, refinancing when they had to, or turning it for a quick profit. Those same consumers, whose incomes may not have increased significantly since then, are finding that their mortgage's fixed-rate periods have ended or are ending soon and something must be done in order to keep their homes.

True, many of the larger, more corporate real estate companies used "market conditions advisories" when presenting paperwork to their clients, but I wonder how seriously their agents took these important disclosures when advising their clients.

No one has a crystal ball, of course. As Realtors, we must lay things out before our trusting clients and let them make their own decisions. Housing is still one of the best investments around, since God won't be making any more land. And it's a tangible investment that -- no matter what -- you can live in it as long as you can make the payments. Like the stock market, however, this is an investment that can fluctuate in value. Any stockbroker would tell you to diversify and save money for a rainy day,

So to all those real estate professionals who dutifully looked after the best interests of their clients, then, I salute you. And for those who rode the last big wave without making sure people knew what they were getting into, I hope this is a lesson that is difficult to forget.

Just stop blaming the press for what you may have helped to create.

"Media Bashing and the Real Estate Market" Copyright 2007 is reprinted here with permission from Dena Kouremetis.

Dena Kouremetis is a licensed California real estate broker, a homebuilder sales trainer, author and columnist.

• Hear Kouremetis' "Uncharted Waters: Navigating the Purchase of a New Production Home," an educational podcast series about buying a newly constructed home.

Media Bashing Rebutted
Housing Mess Not Media Made
Savvy Consumers Don't Shoot The Messenger

Editorial Content Is Intellectual Property • Unauthorized Use Is A Federal Crime

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Anonymous said...

Point well taken. The media didn't create this situation. They are simply reporting it.

However, the media continues to play a very significant role by the way they report it.

Too often headlines here in Santa Clara County have screamed "Housing Slump" when the story is actually that housing sales and prices have dropped dramatically in Clevelend, or Austin or Modesto.

"Record Foreclosures" in Santa Clara County headlines are true and factual. But by the SJMN own reports, stood at 1426 through November for a rate of 130 per month over the first ll months of 2007.

It's no doubt a tragedy for those most directly involved, and these are in fact record high numbers. But isn't it still actually a surprisingly small number of foreclosures for a housing market the sheer size of Santa Clara County?

The local media have let us down by failing to put the situation into meaningful and accurate context, using sensational headlines to sell newspapers and attract viewers, all of which serves to spread and unreasonably heighten fear and concern.

People being what they are, a lot don't get very far beyond the headline, deeper into where news stories might actually contain fuller explanations or at least enough facts that people can weigh and form their own opinions about the real condition of the market place.

If headlines screamed "Housing Slump in Cleveland" or "Record Foreclosures in County Still a Very Small Percentage of Market", the media would have done their job, which is to report the news in a fair, accurate and contextual manner that's most useful and informative to their readers and viewers.

The Mercury News went so far as to make it an ethnic issue, with a story that reported a higher percentage of foreclosed properties involving owners with Hispanic surnames. Then the newspaper cited three examples in that story, two of whom had Italian and Anglo Saxon surnames.

The only example with a Hispanic surname would leave even the most math-challenged people wondering how she managed to get a mortgage to purchase a home, or why that buyer would take on such an obviously risky debt.

In my opinion the media still deserve a hard swat upside their collective heads.

Crystal balls and the Santa Clara County real estate market being what they are, who's to say that we aren't seeing the a fleeting buying opportunity, for those who can still find the means? Any look back historically would far more support this, than the dire reports and predictions we read and hear daily.

And who's to say lenders shouldn't be focusing their efforts more strongly in Santa Clara County, where their risk exposure appears to be greatly reduced by the relatively strong local economy and statistically small number of defaults.

Polls about consumer sentiment give us some indication just how influential the media are. It's a responsibility they haven't lived up to.

There are many questions unanswered:

What percentage of homes foreclosed locally were investor owned?

What number of foreclosures were refinances, as opposed to purchases?

How exactly did lenders and mortgage brokers get around the most basic of loan qualifcations to fund, for example, 103% of the value of a $600,000+ home to a person with a HH income of $36,000 a year?

How did it become acceptable practice to carry a second to avoid morgage insurance?

How many foreclosures involve undocumented aliens? How is it even possible for someone to purchase a home when they are unable to get a driver's license or social security number, can't get insurance or accurately report income, let alone are illegally within the country?

What's happening to foreclosed properites? There's a glut of them for sale on the market right now, which appear to be very slow to sell. Why is that? (Hint: are overwhelmed REO departments at banks taking weeks to even look at the offers they are receiving?)

Why don't the banks that have taken foreclosed properities back turn them into rentals for the time being, minimizing their carrying costs and delaying sales until the market improves, and actually helping out a tight rental market, perhaps even the individuals who find themselves in foreclosure?

Why hasn't the ceiling for a conforming loan - $417,000 - already been adjusted to more sensible levels that reflect higher (or lower) priced markets?

And who didn't see this situation coming and fail to act to prevent it, at best? Or, worse, did they actually encourage it?

Why do we find ourselves, once again, closing the proverbial barn door behind all the escaped animals? What's going to be the cost to taxpayers, to the vast majority of homeowners who carefully avoided the oh-so-obvious risks?

So, yes, I say go ahead and bash the media a bit. It isn't too much to ask them to do their jobs better!

Deadline Newsroom said...

First, as a member of the "local media," I beg to differ.

DeadlineNews.Com reported the potential dilemma of risky mortgages when they were first introduced and as they were more and more pushed on consumers.

We are ALWAYS ahead of the curve on reporting to consumers the issues they face. It's what we do.

Check our archives, at and then try to make the same claims about the "local media."

This is my primary beef with media bashing.

Most of it lumps ALL media in one basket. All media simply does NOT behave the same way.

I believe the print media does a much better job at detail covering issues than TV, for starters. However, TV is faster.

Second, some of your comments are just a matter of splitting hairs.

If the media wasn't telling the story, who would?

The real estate industry?

Without the input from the media you'd have a fantasy market where no matter what happened it would always be a "good time to buy," even when home prices are indeed falling, like they are now. It's simply not a wise time to buy for some people in the short term and even for others in the long term. Real estate doesn't always make your rich. As some people have discovered it can make you homeless.

The media certainly isn't perfect but the alternative is the book cooking, rose-colored-glass wearing, even organized crime behavior that went on during the last boom.

In a free-market society where lenders get to use borrowers as test rabbits, the media is the thin blue line.

If you want censorship, you are in the wrong country.