Can you hear it? Apparently many consumers can't and maybe the media is to blame. Right now it's a rumble, building and poised to really go bust. If you don't have a tight grip on that fence, you could get knocked right off your financial footing.
by Broderick Perkins
© 2008 DeadlineNews.Com
Deadline Newsroom Special Report - Maybe the media does have a negative role in the current housing market -- just not necessarily as a spoiler.
While some real estate industry leaders have called for the media to back off "negative" news coverage about the housing market, the media may not be laying it on thick enough.
More and more reports -- even those from the media-bashing corners of the real estate industry -- reveal the economy will need a lot more Head-On applied directly to housing's hangover, now expected to be a lot more painful than previously indicated.
Unfortunately, consumers appear to be in as much denial about true housing market conditions as are real estate industry leaders who blame the media for exacerbating the housing market's migraine.
A recent Harris Interactive survey conducted for Zillow.com says 77 percent of homeowners from around the country believe the value of their home increased (36 percent) or remained the same (41 percent) in 2007. Only 23 percent believe their home lost value last year.
They must be reading trade journals.
Given market realities, consumers spoon fed a diet of "positive" news, are due for a real cognitive dissonance choking when it comes time for them to buy or sell.
There's far too much disparity in what consumers believe compared to what's really happening in the nation's housing market.
For example, Standard & Poor’s/Case-Shiller Home Price Indices is a leading measure of single-family U.S. home prices. It has long lamented about over-inflated housing prices and often warned of the dire consequences.
Those warnings weren't the kind of influence-peddling pressure that gives consumers a bad case of denial, but based on polished data to help keep consumers, investors and others, who have a stake in the housing market, from losing their shirts.
The data is clear. Home prices are falling in more and more areas and maybe the media isn't getting through to the majority of consumers who believe home prices are stable or growing.
Case-Shiller's index reveals:
• The overall index is in the 11th consecutive month of negative annual returns and a full two years of decelerating returns, nationwide.
• The smaller 10-City Composite index just had a record annual decline of 8.4 percent, the greatest in 16 years.
• A 20-City Composite index also had a record annual decline of 6.7 percent, the greatest since 2000.
"We reached another grim milestone in the housing market in November," said Robert J. Shiller, Chief Economist at MacroMarkets LLC.
Grim? It's brutal.
"Not only did the 10-City Composite post another record low in its annual growth rate, but 13 of the 20 metro areas, each with data back to 1991, did the same. If you look at the monthly figures, every MSA (Metropolitan Statistical Area) has now posted three consecutive monthly declines. Eight of these MSAs, in addition to the two composites, have had more than 12 consecutive months of falling prices. Fourteen of the 20 MSAs, in addition to the two composites, recorded their single largest monthly decline on record in November. For the 10-City and 20-City composites this was a decline of 2.2 percent and 2.1 percent, respectively (in one month), over October," he added.
It's not just S&P Case/Shiller.
• Investment firm Merrill Lynch says in "Forecast Update: Housing Drags Economy Down The Sink,"
home values are in free fall and will tumble 15 percent this year, and an additional 10 percent in 2009. That's because homes are over valued by as much as 40 percent.
• Zillow's own estimates -- "Zestimates" -- culled from 90 percent of the nation's public records on home values, indicate home values declined 5 percent on average last year, with many markets posting much steeper declines.
• The California Association of Realtors (CAR) said in December, home prices in the Golden State declined by 16.5 percent, compared to December of 2006.
When the smoke clears this year, California home prices will be down 8 to 10 percent from 2007, a forecast revised from the previous 4 percent price decline expected for California according to CAR.
• The National Association of Realtors, which calls the Merrill Lynch forecast "too pessimistic" and "unprecedented," continues to hedge its bets, calling for a national median home price decline for existing homes of only 1.2 percent. It previously said, a month ago, prices would be flat in 2008.
The association consistently maintains its conservative forecasts and stays the bullish course on the severely weakened housing market.
Earlier, the trade group forecast that the first quarter this year would come with a record 5.3 percent home drop from year ago levels. The newly revised forecast is a 6.1 percent drop.
But with a 6.1 percent year-to-year drop in the first quarter, and only 1.2 percent decline for the year, the nation's housing market will have to do a fast and furious about face -- right about now.
Truth is, that's not going to happen.
• An ongoing unscientific poll of visitors to the Deadline Newsroom is leaning toward a housing market recovery sometime after 2010.
• That's in line with Moody's Economy.com, which recently projected the beginning of the end would be in early 2009, but only if home builders further curtail housing starts, sellers shave a lot more off asking prices and lenders loosen their purse strings, among other necessary cooperating market conditions.
• Builders have been lowering prices for nearly a year now and that's giving many recent new home owners vertigo from prices spiraling down so quickly. In some cases, newly purchased homes are worth hundreds of thousands of dollars less than they were when purchased just months ago because discounts in the same development has cut into what turned out to be the kind of phantom value Merrill Lynch and S&P/Case-Shiller warned of.
There's more "negative" news.
• The U. S. Census Bureau said compared to one year ago, the fourth quarter 2007 homeownership rate of 67.8 percent represents the largest annual decline in the rate of homeownership since the bureau began tracking the rate in 1965.
An additional 80,000 homes sat vacant and available for sale nationwide in the fourth quarter 2007, compared to a year earlier. The 2.18 million vacant homes for sale in the fourth quarter matched a record set in early 2007.
• Late last year, the U.S. Conference of Mayors posted a grim consensus detailing how spiraling losses from the residential foreclosure crisis would rattle the nation’s largest metro areas.
"Not that long ago, economists said housing was the backbone of our economy," said USCM president Douglas Palmer, Mayor of Trenton, NJ. "Today the foreclosure crisis has the potential to break the back of our economy."
With the mortgage meltdown steeped in credit market investor fear and lender failures, even low mortgage rates won't get buyers to jump off the fence. There's no easy-money safety net to catch them.
Combine the fear of recession with tight mortgage money and it's no wonder potential buyers are grabbing more than a toe-hold on the wait-and-see fence.
It's simple economics. Less demand means still lower prices and maybe, just maybe, it's not such a good time to buy a home, unless you know, without a doubt, that you can buy and sit through the housing hangover for a year or two, if not longer.
Consumers with falling home values or those shopping for appreciating homes shouldn't be under any mistaken or misguided beliefs. They have a right to know what's really going down under that roof over their heads.
Recently, housing coverage most certainly has been "bad news." The coverage is "negative." Unless you hunt realty market carrion, foreclosures, falling home prices and lost equity certainly aren't "positive" news items.
It's not the media's job to cover safe commercial airline landings.
Safe landings don't make the film-at-11 segment.
On the other hand, a cornerstone of the economy crashing and burning?
Now, that's real news.
There was a run on "good" housing news a few years back and well, the media should be fresh out.
Catch the good news again during the next fluff cycle.
- 30 -
• Media Bashing Rebutted
• Housing Mess Not Media Made
• Savvy Consumers Don't Shoot The Messenger
• See what Seeking Alpha has to say on this matter.
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© 2008 DeadlineNews.Com
Broderick Perkins, an award-winning consumer journalist of 30 years, is publisher and executive editor of San Jose, CA-based DeadlineNews.Com, a real estate news and consulting service, and the new Deadline Newsroom, DeadlineNews.Com's new backshop. In both cases, it's where all the news really hits home.
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