No news reporter has the inside scoop, the full story, or the total background. They are, by definition, outsiders. Years ago, when I was living in Cincinnati, I attended a business luncheon and the key note speaker was a local reporter turned politician by the name of Jerry Springer. (This was indeed after the erstwhile politician Mr. Springer was accused of passing a bad check to a call girl in Northern Kentucky.)
Mr. Springer proved to be a very interesting and informative speaker. He talked about a pivotal turning point in Presidential news coverage - The assassination of President Kennedy. Ever since that poorly filmed assassination, no President travels without an entire bus or plane full of reporters with cameras at the ready. Reagan came to Cincinnati around that time and there were bus loads of reporters following him. They followed him even though there was no scheduled public appearance. But what I found insightful was Mr. Springer's take on investigative reporting and "insider" reports.
Reporters operate on a deadline, start with zero contacts and little or no background, they have no time for in depth immersion into a story; and often they resort to quoting self serving publicists or activists with an agenda.
What got me to thinking about this is the press coverage of the real estate market - both nationally and locally. The National Association of Home Builders (NAHB) recently posted an article about the amount and effect of all this negative press coverage. While the NAHB certainly has a dog in this fight, the article makes some excellent points:
The nation's prospective home buyers may derive some of their information on the housing market from the news media, but at the end of the day the things that matter far more when they are deciding whether to make a purchase include the price of the new home, mortgage interest rates and their housing needs, according to a new nationwide survey commissioned by NAHB.
"While the majority of the households we polled indicated that they found the media a reliable source of information on the housing market, what they read in the newspaper, saw on television or heard on the radio was no substitute for actually going out and shopping the market," said Thomas Riehle, a partner in RT Strategies, which conducted the research for NAHB.
"When people are actually thinking about buying a home, they are driven by the details of how it will impact their family budget and lifestyle and contribute to their long-term wealth, and that gives them a much closer perspective on the market than what can be conveyed in news coverage," Riehle continued.
When asked to rate the importance of several factors that might affect their decision to buy or not to buy a home, survey respondents put the home's price at the top of the list, with 80% citing its significance.
That was followed by: the potential for the new home to appreciate in value, 71%; the prospect of selling their current home at a fair price, 70%; the level of mortgage interest rates, 69%; and personal life changes, such as a new job or an addition to the family, 60%. On a list of eight items, news stories on real estate market conditions ranked second from the bottom, with 28% saying that it was an important factor behind their decision to buy.
When further asked about the influence of the news media on their decisions of when to buy a home, only 19% of the respondents said it played an important role; 23% indicated that it had some importance on their decision; and 7% said it played a minor role. A full 48% said it had no influence whatsoever.
Sixty-one percent of the survey participants said that the media is "sometimes trustworthy" as a source of information on the housing market and 5% said that it is "always trustworthy." Twenty percent and 8%, respectively, said it is "seldom trustworthy" and "never trustworthy."
"The media provides an important service by giving consumers the big picture of what is occurring in the housing marketplace, even the big picture in their local markets. But despite that, local reporting can't convey the information that consumers consider the most when they are looking for a new home," said NAHB President David Pressly. "The fact is that even as the national market is slowing down from the unsustainable pace of the past few years, there are sizable numbers of families who need new homes. And with a wide selection of new homes to choose from, with mortgage rates remaining near historic lows and with incomes and jobs continuing to grow, the opportunities are extremely favorable for buyers in today's marketplace.
Home builders are working down their existing inventory of homes fairly quickly and the current slowdown in production is expected by NAHB economists to have run its course by the middle of 2007. From that point forward, the industry is expecting to see a good balance in the marketplace between supply and demand, setting the stage for a healthy and sustainable trend for housing, supported by a growing U.S. economy. (Full story click here)
There is nothing, and I mean NOTHING, that can replace actually field time and "face time" in the marketplace. You have to go out and test the water your self. You have to BE THERE. You may read in the paper that the market is soft so you decide to go visit a community you have had your eye on and perhaps pick up a deal. When you get here you learn that this particular community is doing well and has only a few condos left for you to choose from. The news in the paper is way too broad for you to be making decisions on. Unfortunately this is a lesson I have to learn over and over again. I love to go out in the market and talk to the sellers, the buyers, the developers and the builders. When I sit and work a few weeks in the office without venturing into the field, I am relying on the perspective of others and lose immediacy of the information.
I was in Seoul Korea on a business trip some years back. In fact on that trip I was there for ten days. When I got back I was bombarded with questions from my friends about all the rioting in Seoul. My friends had read that parts of Seoul were shut down, the American hotels were under heightened security, and there was tear gas in the streets. But my personal experience was uneventful and I never heard a thing about any unrest or riot for the entire period I was there. My point is that if things are going well, there is no news. It is only the exceptions that make it to print.
I will often drop my office work and drive through a community with one of our agents. We stop into open houses, walk through commercial complexes, talk to tenants and talk to buyers. I call it "running the traps". If you need to be convinced that this is a good time to buy - come here and "run the traps", ignore the headlines and look beyond the negative press. The 30,000 foot view will not serve you well - you need to get in the trenches.
Right now interest rates are low; inventory is high, and sellers are eager to negotiate; incentives are available, choices are many. Will prices go down? Maybe, maybe not.
Will prices go up? Most assuredly. It is just a matter of WHEN (Timing is everything, isn't it?)
Gregg Fous
Engel and Voelkers
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