News Media Creating the Housing Crash?

NYTimes - "To hear some people in the real estate industry tell it, one of the biggest problems with the housing market is what is being said about it in the news media."

"Agents and industry executives say reporters, editors and news anchors are making a cooling market sound worse than it is."

"Richard A. Smith, vice chairman and president of the Realogy Corporation, the nation’s largest residential real estate broker, said there was a “constant flood of media that is so negative” that it was discouraging many potential buyers and sellers."

'“Nobody wants to be foolish in this kind of market,” he said. “No one wants to sell too low or buy too high.”'

"Critics point to an article in Fortune magazine in October 2002 that they say illustrates how reporting can distort the market picture. The article, which was about housing on both coasts, argued that prices were rising so fast they were unsustainable, and that a bubble might be created that would inevitably burst."

"An example of the problem, the article noted, was a San Francisco Victorian that sold for $285,000 in 1996 and was listed for $1.2 million in 2002. Coldwell Banker, which listed the home, complained that Fortune should have noted that the home had been significantly renovated, which would account for much of the price increase."

"That year, in an interview with Real Trends, a trade publication, Alexander E. Perriello III, who ran Coldwell Banker then and now heads all five of Realogy’s franchise brands, criticized the article. “I’m getting sick and tired of irresponsible journalism that attacks one of the few bright spots in the U.S. economy,” he said."

"But the real estate agent who listed the house, Al Rodriguez, said last week that home’s value had soared even before it was put on the market in 2002. The couple that was selling it then had bought it the year before in a frenzied bidding war for $1.1 million."

"Shawn Tully, who wrote the Fortune article, said in general it was the price of the land, not the homes, that was soaring. At any rate, he said, he wasn’t sure what all the criticism was about. “If my story was so influential,” he said, “why did the prices increase another 50 percent between 2002 and 2005?'”

"Indeed, home values climbed an average of 12.5 percent annually in the San Francisco area from 2002 to 2006, according to a government home price index."

"Many journalists who cover the real estate market said they expected, and were not worried by, criticism from the industry. They said they were more concerned about whether the news media were skeptical enough about the boom while it was continuing."

'“We were late to the savings and loan crisis and we were definitely late to the dot-com crash,” said Bradley J. Inman, publisher of Inman News, a real estate news service, who said he believed that the news media have done a better job covering the housing boom."

"Some critics say the news media did not include enough contrary viewpoints during the run-up in home prices."

'“Obviously, people get carried away,” said Dean Baker, co-director of the Center for Economic Policy Research in Washington, who runs a press criticism blog called Beat the Press. “But if there are voices that challenge it, it stops some people.”'