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Good News! Lower House Prices!

By someone else follow someone else   2008 Apr 16, 7:13am 17,746 views  166 comments           share      

happy

How can we get the press to stop reporting lower prices as bad news?

Lower food prices = good.
Lower gas prices = good.
Lower house prices = GOOD.

Why don't we see the good news story of lower prices in the press?

Patrick

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1   Peter P   2008 Apr 16, 7:28am  

Home is an investment that never goes down in value. ;)

Not investment advice

2   DennisN   2008 Apr 16, 8:22am  

Move Realtors (R) onto a SALARY basis and then get them off of commissions. Then even they will howl for cheap prices.

Realtors are licenced by their states. If the states can legislate the fee structures for attorneys (which they certainly do), then they can legislate the fee structures for realtors.

3   Malcolm   2008 Apr 16, 9:28am  

Even on the news yesterday, they were very matter of fact reporting the new median prices for San Diego. They sure used to hype the story when it was going the other way.

Obviously there are two main reasons though.
News reporters are people too, and they own houses so they don't want to contribute to a panic that hits them directly in their home value.

As you have spelled out, the RE industry is one of the largest advertising segments out there, so they don't want them getting pissed off.

4   Malcolm   2008 Apr 16, 9:30am  

Politicians love high prices because then they have a cause. "I'm going to create a program to help you afford the house."

When prices tumble you would think it is a good thing but then revenues fall and they can no longer have these self serving programs, plus they're not needed.

5   Malcolm   2008 Apr 16, 9:35am  

BTW, that graphic is perfect. I'd love to see a Walmart style falling prices video of the little face knocking down prices of a real estate 'For Sale" sign.

6   HeadSet   2008 Apr 16, 9:49am  

Why don’t we see the good news story of lower prices in the press?

Because so many see houses as investments. They think rising house prices are good just like rising stock prices. Note that both stock investers and house "investers" love low interest rates.

Malcolm is right. Politicians do not want a nation of savers in paid off homes. They do not want a large number of renters with high savings either. The financially independent do not need the extraneous "services" that politicos use to buy votes.

7   Peter P   2008 Apr 16, 10:01am  

They do not want a large number of renters with high savings either.

Renters with high savings are almost as rare as airline-flying billionaires in this country.

8   StuckInBA   2008 Apr 16, 10:20am  

To be fair, the press also says "It's good to be a buyer today". Then we blast them for not recognizing how terrible it is to buy right now.

Another one for being fair, the press does the same for stock prices. It never cheers fall in stock prices - which CAN be actually good for a long term buyer.

I recognize that there is a bias everywhere that rising home/stock prices are great for us. It makes us feel rich.

We do need asset inflation for such psychological reasons. But within limits that are hard to define. Greenspan wasn't being a fool when he "missed" recognizing the bubble. He didn't want to be the one who popped it.

It is possible that without asset price inflation, the overall motivation to own assets may diminish. Do not underestimate the effects of psychology which is a cornerstone of economic studies - and it is not simply number crunching or accounting.

9   DennisN   2008 Apr 16, 11:39am  

Renters with high savings are almost as rare as airline-flying billionaires in this country.

You mean like Warren Buffet?

10   Peter P   2008 Apr 16, 11:46am  

You mean like Warren Buffet?

His company owns NetJets.

For years, Buffett mocked corporate ownership of jets as a wasteful executive perk. But in 1986, he bought a small used plane for Berkshire, then traded up to a more expensive model a few years later. He named the jet ''The Indefensible'' and made sport of its purchase in his 1989 report to shareholders: ''Whether Berkshire will get its money's worth from the plane is an open question, but I will work at achieving some business triumph that I can (no matter how dubiously) attribute to it.''

The truth is, Buffett had fallen in love with his plane but could not yet admit it. In 1995, he was introduced to Santulli by the head of one of Berkshire's operating companies and bought a one-quarter share of a Hawker for personal use. His wife, who has become a frequent flier, called the new plane ''The Richly Deserved.'' (Not to be outdone, Buffett renamed Berkshire's jet ''The Indispensable.'') Santulli offered to sell his company to Buffett when Goldman, Sachs & Co. (GS), a founding minority investor, began pressuring him to float a public stock offering.

http://www.businessweek.com/1999/99_27/b3636001.htm

Private jets are important business tools. Those who can afford flying private but choose not to are as delusional as jealous bitter renters. :)

11   kewp   2008 Apr 16, 12:04pm  

So you are saying, sell your house and buy oil and food?

12   Peter P   2008 Apr 16, 12:11pm  

Or... buy a gingerbread house.

Not house-buying advice, unless you are Mr. Gingerbread Man.

13   Brand165   2008 Apr 16, 12:58pm  

Gingerbread Men are poor credit risks. They tend to run, run away as fast as they can. Terribly hard to catch (they're gingerbread men). But as it would be ethnic profiling to exclude Gingerbread Men from mortgage loans, we'll simply have to restrict loans on edible housing until further notice.

Shittybank Management

14   EBGuy   2008 Apr 16, 2:33pm  

Renters with high savings are almost as rare as airline-flying billionaires in this country.
This one picture really says it all. Just two billionaires kicking back.

15   rustypolymath   2008 Apr 16, 10:03pm  

http://us.ft.com/ftgateway/superpage.ft?news_id=fto041620081713149197&page=2

"In an interview with the Financial Times, Mr Dodd said that a compromise deal needed to be reached before home prices collapsed further and election-year politics took over. 'I am optimistic at this point, but this has to happen fairly quickly if it is going to be meaningful.'"

I instantly thought of Mr. Killelea's last post when I saw this. When you delay a recession, you get a CRASH. Thank you, Greenspan, Clinton and Bush! And of course this time, with the U.S.A. largely deindustrialised there will be no World War to restart the engine. When China snatches up the prize, either we rediscover how to work for our own livelihood or we perish.

Five to seven times the average household salary is unsustainable, but of course, so long as we can loosen fiscal and monetary restraints to hold out the disaster until the next government takes over, we can at least defer the blame.

16   Malcolm   2008 Apr 16, 10:59pm  

I think it is going to be hard to pass the blame on to the next guy.

17   mgonsior   2008 Apr 16, 11:06pm  

Michael Kinsley wrote an article applauding falling house prices in TIme Magazine last year:

http://www.time.com/time/magazine/article/0,9171,1655723,00.html

18   Jimbo   2008 Apr 17, 12:05am  

Falling home prices are great for people who wish to buy a home, not so great for the 2/3 of the population that already owns a home. Though it is actually good for those who wish to move up, even though they often don't think of it that way.

19   GammaRaze   2008 Apr 17, 12:26am  

Falling houses are not bad for 2/3 of the population, only those who bought in the last decade and those who used their house as an ATM and took out too many home equity loans.

20   SP   2008 Apr 17, 12:33am  

People bitch about falling home prices because:

1. Their net worth is zero or negative without an inflated house price to prop it up

2. They got used to the house "earning" an extra income for them

3. In most cases, the house "earned" more than they did

4. They don't see housing as an expense - they (wrongly) believe it is an "investment"

5. They have been fed a lifelong dose of PTB pablum, so they think Debt = Wealth. Speculation = Investment. Dumb Luck = Savvy Investor.

Many sheeple seem to be very poor at assessing what is in their own long-term interest - they are driven more by what feels good right now, and a largely fantasy-based "belief" system that America is more Norman Rockwellian, than the evidence that is more George Orwellian.

21   sa   2008 Apr 17, 12:33am  

I doub't majority of people care about falling house prices. May be a few whou bought over last few years and a few dependent on housing ATM. Media/Congress/Fed/Financials/Realtors/Builders make it a big deal, cause it shows up on their reports. They have to show reports quarter after quarter and they want to look good.

22   sa   2008 Apr 17, 12:38am  

May be we have a poster boy for UK housing crisis. Read the link.

UK Housing Crisis

23   SP   2008 Apr 17, 12:38am  

From an MSM puff piece about how great :-) the market is...
“McCarbery’s daughter Cynthia Nordskog, a real estate agent, said she’s sold houses to just two clients this year, including her father.”

Isn't that some kind of elder abuse?

24   SP   2008 Apr 17, 12:42am  

How can we get the press to stop reporting lower prices as bad news?

Simple - buy more advertising space than the REIC. The MSM is mostly a bunch of ad-peddling whores - so pay them enough and they will say whatever you want them to.

Why don’t we see the good news story of lower prices in the press?

They have not figured out a way to monetize that theme.

25   GammaRaze   2008 Apr 17, 12:44am  

>Isn’t that some kind of elder abuse?

LOL.

I think more and more real estate sales this year and next are going to be to friends and relatives and a couple of years from now, that will lead to some heavily strained relationships.

26   SP   2008 Apr 17, 12:54am  

And here is an example of the kind of vomit that the press is trying to sell as wholesome, chunky chowder...

http://tinyurl.com/643eod

"“The best buyer is the most informed. They’ve got to do their homework, look at the models, talk to the builders,"
(ed: Hah!)

“Assume people feel the market has bottomed. "

“People are coming out now because they’re being told by their elders that is the time,”

“In 1991 the average price of a home was $120,000. Now it’s around $246,000. That’s more than double. You can never lose in housing. That’s where all the nation’s wealth is sitting.”

"buyers should not count on discounts and incentives lasting too much longer."

27   DennisN   2008 Apr 17, 1:18am  

Rats. So WB flys private jets nowadays. IIRC I first listened to WB when he was a frequent guest on Lou Rukeyser's "Wall Street Week" show back in the early 1990s. I could swear he ridiculed guys with private jets back then.

I really should have kept that Playboy issue where Rukeyser posed in the nude.....

28   Peter P   2008 Apr 17, 1:29am  

I could swear he ridiculed guys with private jets back then.

Yes. He used to "mocked corporate ownership of jets as a wasteful executive perk."

It is absolutely inexcusable to let top executives fly airlines in today's world.

29   Peter P   2008 Apr 17, 1:31am  

there will be no World War to restart the engine

Why the optimism, rustypolymath?

30   HARM   2008 Apr 17, 1:33am  

As you have spelled out, the RE industry is one of the largest advertising segments out there, so they don’t want them getting pissed off.

“It is difficult to get a man to understand something when his salary depends upon his NOT understanding it.”
–Upton Sinclair

http://patrick.net/wp/?p=119

31   DennisN   2008 Apr 17, 1:36am  

The REIC may be a big advertiser in print newspapers, but they are much less in evidence in magazine journalism and on-line. I guess that's why that article in TIME (linked above) was OK for them to run.

32   Peter P   2008 Apr 17, 1:41am  

"Hope will ruin you, because it is nothing more than wishful thinking and provides no basis for action."

-- William D. Gann

As a result, hopeful sellers are chasing the market down.

33   GammaRaze   2008 Apr 17, 2:09am  

Someone I know decided to move back to India a few months ago. He sold everything and packed off his kids and wife to India.

However, he is still sitting here alone, to "sell his house".

I am pretty sure he could save himself a lot of trouble, inconvenience and money by just lowering the price, but no one wants to tell him that.

He is hoping that things will turn around and he will get the "right price" for his house.

34   pipeline010   2008 Apr 17, 2:50am  

Real Estate has traditionally been a great investment market, as buying homes have always, on the whole, been a good thing (like Preparation H).

When people see home prices go down they attribute that emotionally with the value of the American dream going down. It also speaks of the American bias against renters.....renters are losers, if you are a homeowner you ARE somebody.

So media caters to homeowners. If you own a home yes it sucks that prices are dropping! If you're like most of us here it's most certainly a good thing, on sooooooooooooo many levels.

For Example: that bee-atch RE whore who refused to even take my offer on a house I bid on to the seller a year ago? Ya, she lost her job 2 weeks ago.

HELL YEA!

35   EBGuy   2008 Apr 17, 3:08am  

DQ numbers showing up in SF Chron Story. Will be interesting to the the country breakdowns later today.
A research firm says the median home price in the San Francisco Bay area has fallen 16 percent over the past year.

DataQuick Information Systems reported Thursday that the median home price in the nine-county area was $536,000, compared to $639,000 in March of 2007, and down almost 20 percent from the peak of $665,000 last summer.

The number of homes sold plummeted 41 percent from a year ago — to 4,898 from 8,317. That makes for the slowest March since the San Diego-based research firm started keeping statistics 20 years ago.

DataQuick says the area has not been hit as hard during the housing crunch as other parts of the state like the Central Valley and inland Southern California.

36   Ed S   2008 Apr 17, 3:12am  

SP,

What a great find! My favorite was

"Basic saw those conditions in 1983-86 and again in 1989-91, first when the market stalled during the presidency of Jimmy Carter, with interest rates near 22 percent, and again during the first Gulf War. "

Wow! And I thought Ronald Reagan was President from 1980 to 1988.

Is anything right in the article?

37   Peter P   2008 Apr 17, 3:22am  

I am pretty sure he could save himself a lot of trouble, inconvenience and money by just lowering the price, but no one wants to tell him that.

It is unlikely he will listen anyway.

This slow-motion market psychology is great educational material.

38   Peter P   2008 Apr 17, 3:34am  

if you are a homeowner you ARE somebody

If you fly airlines, you are still nobody...

39   DennisN   2008 Apr 17, 3:51am  

Sri,

Maybe there's another reason about your friend. Maybe he likes being a Bay Aryan bachelor.

"Sorry, honey, I'll get right back with you and the kids just as soon as this darned house sells." ;)

40   EBGuy   2008 Apr 17, 3:51am  

The Bay Area DQ numbers are out. Looks like they are trying to blame the mix; I think we all know how that will turn out.

Last month's median price would have been closer to $597,000 if the availability of jumbo home loans had remained stable. A year ago jumbo loans, mortgages above $417,000, accounted for 62.2 percent of all Bay Area home loans. Last month they were 29.8 percent.

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