DO YOURSELF A FAVOR. SMILE OR EVEN LAUGH AT YESTERDAY'S STORIES ABOUT THE SEPTEMBER NUMBERS ON EXISTING HOME SALES. A MONTH FROM NOW THEY WON'T EVEN BE REMEMBERED. AND TWO MONTHS FROM NOW PEOPLE WHO RUN ACROSS THESE REPORTS WILL SHAKE THEIR HEADS AND ASK: "HOW COULD WE HAVE LET THE FEAR-MONGERS AMONGST US SPIN SUCH TALES OF THE END OF THE WORLD BEING AT HAND ON HOUSING, WHEN IN FACT WE WERE LOOKING AT THE END OF THE HOUSING PANIC AND THE START OF A MAJOR, EVEN MASSIVE, COMEBACK IN THE HOUSING MARKET."
MAYBE IT IS BECAUSE I HAVE SO MANY YEARS OF BEING INVOLVED WITH BANKING AND REAL ESTATE THAT I NOW HOLD OFF FORMING JUDGEMENTS UNTIL I PICK A NUMBER UP, TURN IT SLOWLY TO EXAMINE EACH SIDE AND THEN EVALUATE IT TO FIND OUT WHAT THAT NUMBER IS REALLY TELLING US. THAT IS NOW SUCH SECOND NATURE TO ME THAT I AM ALWAYS SURPRISED TO FIND SOMEONE, ESPECIALLY ONE WHO WANTS TO BE SEEN AS AN OBJECTIVE PROFESSIONAL JOURNALIST, WHO SEEMS TO BE DOING THE OPPOSITE - NAMELY TWISTING DATA TO FIT A SPECIAL PURPOSE, SCARING READERS AND VIEWERS OUT OF THEIR WITS AND MAYBE HELP RATINGS IN THE PROCESS.
Before I give you two vivid examples of this from TV news shows yesterday, allow me to explain why the housing data yesterday prompts me to say right out straight, with no hedging or fudging, that I now expect to be able to sound an early-warning of clearing-skies-ahead signal for housing fairly soon, and then to possibly give out with an ALL-CLEAR FOR HOMEBUYERS BY EARLY 2008.
Here's the scoop: August was the worst possible time for anyone to attempt to buy a home. It was the month when the shocking news about subprime mortgages came out and scared both bankers and potential homebuyers. All too frequently, both mortgage lenders and those who had been shopping for a home decided to drop whatever they were doing - if it involved buying or financing a home - and head for the hills. Time and time again in August, buyers backed out of commitments they had made even if it meant forfeiting a small binder. And on the other side of the table, bank lending officers told thousands of wannabe buyers that their bank's loan committee had exercised their option and had refused to give final approval to a mortgage application, scrubbing a near-sale from the books.
Unfortunately all of these total negatives combined to strip away many sales that had been in the works. The residue is what was reported yesterday as being the biggest drop-off in existing home sales in years. The report was taken at face value, and the media - led by journalists who might not even understand what I have just shared with you - adopted a "sky is falling" tone of voice last night as they set out to make people believe that the housing recession is now growing so bad that it is about to pull down the general economy into a recession. I am certain that you will not fall victim to such twisted reports, especially now that I have given you the in-depth hard facts underlying yesterday's news. That news, when it first came out, was presented so negatively that it scared investors into dumping stocks and drove the Dow down some 200 points.
I have to assume, given the market's strong and steady comeback during the day, that word slowly seeped out about the true situation. That August panic low already seems like ancient history. So much has been done to strip away the phony expectations that had been moving financial markets then that I now feel certain the bulk of the bad news is now out in public and has been picked over. Yes, there were some unpleasant facts among this bad news. But nothing Americans in and out of finance, real estate, building and investing cannot handle. As a result, interest in buying homes and signing on for mortgages has begun to slowly pick back up again.
Even without waiting for better news in the next report, due out in a month, I can tell you there were already bright spots in yesterday's September report. Take, for example, the fact that the overall national median home price had broken three straight months of stable prices to slide down 4.2% to $211,700 in September - when purchases and mortgages being negotiated in panic-stricken August were closed. (That included condos, town houses and single-family homes combined.)
But there were significant regional differences. The median price of existing home sales in the West was down 8.8% from a year earlier, well within the 10% price decline we had predicted for the nation as a whole when we first spoke of a time-out in housing two years ago. And the median price decline for 12 months ending in September came to 5.5% ($174,400) in the South. These two regions included many of the worst areas for housing speculation - including California, Florida and Arizona - which pulled down the average for less speculative sections. But in the North the numbers of September were brighter.
The Northeast, which according to many Realtors and bankers may be showing a few signs of leading the way out of the time-out slump, reported a one-year median price gain of 0.5%. That's not earth-shaking but if housing can endure all the problems of this September and do that well there are reasons to suspect the next year could bring a new birth of rising prices. The same is true of the Midwest, where median prices managed to eke out a one-year gain of 1.4%. These are turbulent times for housing and mortgage lending, so there will be conflicting news stories for months. But I think we may find the worst is behind us.
I promised to give you two examples of newscasters on TV whom I thought were engaged in a clear effort to scare viewers with stories, when the facts were nowhere as bad as they may have wanted you to believe. The first instance came during the day, when a lady reporter stuck a microphone in the face of California Governor Schwarzenegger and asked him if there might have been less fire damage had more help had been forthcoming earlier. The Governor, no slouch when it comes to speaking his mind, firmly grabbed her hand with the microphone so she could not back away with it, smiled at her and the TV viewers, and proceeded to explain in simple, powerful words how much good work was being done by many people and had been done from early on. She had lost control of the interview and knew it as viewers were told the true facts. It made me wish the brilliant new U.S. commander in Iraq would do that with some hostile reporters trying to hide the smashing series of victories by America (with few soldiers being lost) and by our new allies in Iraq (the old ruling sheiks).
Now I want to tell you about a second TV journalist who seems to have a personal agenda - namely to spread fear about the housing market. It was not enough that this person traced a litany of problems with housing and mortgages - always picking and choosing the worst possible cases and completely omitting all of the good news that I have shared with you here. No, that was only a warm-up for the apparent REAL purpose - namely to draw wrong conclusions and warn that the housing debacle could lead us directly into a recession in the broader economy next year.
I think you know I do not and cannot agree. But the wrong message being sent out to a wide TV audience is, as far as I am concerned, none of my business. I have devoted myself solely to my own readers, including especially you. We will look at more events as they break next week, and as usual I will make sure that you have the correct picture. For example, we probably will discuss the follow-up to the Southern California fires. A lot of homes were destroyed. People will be getting checks from insurance companies, which are flush with cash after having raised rates sky high a few years ago. Some of this money may be used to buy homes now sitting empty. And more will be used to rebuild burned-out homes. That will involve investing in materials and hiring some of the available construction workers (and builders). Thank you, Adrian Van Eck