Fantasy in the Real Estate Business

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Have a gander at some of the nonsense that flowed from a recent gathering of real estate agents and their friends, as reported by the North County Times.

The last portion of the conference, a question-and-answer session, admonished the media for depressing consumer confidence by focusing on only the negative aspects of housing data...

George Chamberlin, a panelist at the event and columnist for the North County Times, said that some news reporters biased their reports because they are jealous of homeowners.

Most real estate agents who spoke at the conference seemed to agree, with one agent suggesting that agents and builders pull all advertising from newspapers until positive articles are printed.

There was an enormous, record-shattering bubble in residential real estate. Prices rose to previously unimaginable heights in comparison to local incomes (which dictate what people can afford to pay for a home) and rents (which represent the "competing product" for having a roof over one's head). Homes got so expensive that it was only possible for many people to afford them by taking on highly risky mortgages that traded lower initial payments for much higher eventual payments.

Once the speculation among home buyers and lenders came to an end, there wasn't a whole lot of question that home prices would begin to make their way back to levels that could be justified by true economic fundamentals. And so they have.

The current housing crash has one single cause: the speculative bubble that preceeded it.

Instead of acknowledging this reality, however, the conference panelists in question offer the implausible idea that everything would be fine if only the media would pretend that there is not a severe housing downturn underway. Our old friend George Chamberlin renders the conspiracy theory even more surreal by offering the indefensible thesis that the journalists who have the unmitigated nerve to report factual data do so because they are jealous of homeowners (as if there were any sort of barrier to becoming a homeowner in the boomtime era of no-doc, nothing-down, neg-am loans).

It's all pretty unbelievable -- as is this next bit, from the same article on the same conference:

"People think the market is down and the market will still go down. That's not the truth. The market is down, but it's not going down anymore," said John Tuccillo, former chief economist for the National Association of Realtors. "I think it's because consumers focus on national news and not enough on local news."