Real estate reporter mad as hell, not going to take it anymore.

Millions of housing consumers [would] like a little consideration, perhaps some consolation, from an industry that snared them with deals that too often were too good to be true or worse—a bill of goods...It is counter productive, irresponsible and a position of denial when industry leaders dribble on about the media spawning, exacerbating or prolonging the housing market's downturn...Some market woes, including homeownership failures, are also due to over-inflated home values pressured up by the strategy of under pricing listings to drive up bids, appraiser collusion, insider corruption and crime so rampant the Federal Bureau of Investigations is on the case...

Whoa!  No, this isn't some rabble-rousing red hot raising hell on a bubble blog.  It's just normally mild-mannered syndicated real estate reporter Broderick Perkins, who ducked into a telephone booth and came out wearing the bright red cape of Super Reporter.

Here's another whiff:  "While perhaps  (italics mine) only a bad-apple minority in the real estate industry is to blame, none of it was instigated by the media...The traditional journalism media is, in part, a watchdog.  It's job is to report no matter how much those covered in the media whine, rattle cages and crack whips to bind and blind.  The media is supposed to offer fair, unbiased and balanced coverage not to placate those covered, but to imbue the reading public with objective information it can use to make its own decisions."

I'm a reading public, and I can't decide whether what I just quoted is a) a rant, b) a tirade, or c) a tantrum.  I am reasonably sure it's not a career move.  In fact, I'm a little surprised that Perkins' syndicator, Realty Times, allowed this left turn in "traditional journalism" to see the light of day.  I was half-way expecting to find the article pulled when I returned to their Web site a few hours after I first read it.  Because as the opening salvo of a new bubble blog, it's a real stem winder.  But as an example of "fair, unbiased and balanced coverage", it falls a little short. 

About from here to Chicago short.

At least Perkins got one thing right.  Real estate industry leaders always criticize the media's coverage, even when the market is booming, but especially when it's tanking.  This is nothing new.  In fact, I suspect it's written into the job description of every brokerage's CEO.  Nothing personal.  Strictly business. 

And, yes, this criticism is usually counter-productive.  It makes the industry look like it's trying to censor the news, which simply plays to the public and media perception of the industry as a sleazy cabal with unnatural powers of coercion and plenty of dirt to sweep under the rug.

And no, the media doesn't cause or prolong market slumps, at least in my opinion, because it doesn't lead the public, it mirrors it.  I'm confident that the average reporter isn't cut out for the heavy lifting of opinion making.  

But the media can't have it both ways.  Consumers can't be sturdily independent thinkers beyond the media's influence, as Perkins says, yet be mindless robots herded by the real estate industry to their doom, as Perkins implies.  Consumers are either independent thinkers or they're not, either mindless robots or not.  To say that the industry "snared" consumers is to say that the industry somehow forced independent-minded consumers to act against their will and best interests.  I sure hope Perkins isn't saying this, because it wouldn't be "fair, unbiased and balanced coverage".  But it's a topic that's always grist for the mill on the bubble blogs.       

And I have to ask Perkins just who the heck cares what the CEO of Century21 Real Estate, whose tepid quote in Business Week  set him off, says?  Not the public, that's for sure.  Not even the real estate industry, would be my guess.  But at least one real estate reporter saw the gauntlet thrown down and couldn't wait to pick it up.

Must have been a slow news day. 

Or maybe it goes deeper than that.  Lots deeper.

We'll go lots deeper in a moment but first, a brief response.

The real estate industry "snared" millions of consumers with "a bill of goods", did it?  That's called "blanket condemnation".  And you know who can be counted on to eschew blanket condemnation?  The people who deliver "fair, unbiased and balanced coverage".  When industry leaders engage in blanket condemnation of the media, "fair, unbiased and balanced coverage" rightly condemns it.  Because blanket condemnation demands the highest form of proof.  When no proof is forthcoming—when the justification is simply an implied "everyone knows they're dirty"—then blanket condemnation is rightfully called "irresponsible". 

"...over-inflated home values pressured up by the strategy of under pricing listings..."  If, as Perkins says, "there has been no documented evidence that the media has been collapsing economic sectors", then there is also, to my knowledge, no documented evidence that competing home buyers drive prices above market value.  It's just another something "everyone knows", part of the "collective wisdom" people build blogs around. 

Of course, the person who thinks home buyers are regularly suckered into paying too much knows he'd never fall for that himself, no sir, no matter how many buyers he was competing against or how much pressure his self-serving agent applied.  No, he's made of sterner stuff.  But the funny thing about stern stuff is that he's invariably never made an offer.  So how does he know what he's made of?  How does he know that home buyers are spineless nit-wits who wilt under agent pressure?  

Because "everyone knows".  Everyone who's never been there, that is.

Let me add some much-needed value to this discussion by giving you a real-life example of how under pricing and over bidding works. 

A home in a nearby city is priced at $949k.  A newer home, almost the same size and just across the street, sold earlier this year for $1M.  A slightly smaller home a few doors down, also newer, sold for $975k.  So $949k should be easily achievable for the home now on the market.  $949k is a fair price for that home. 

Yet there that $949k home sits, unloved, unwanted, no offers, no interest.  Because the market value of a home is more nebulous than people outside real estate think.  People outside real estate think a property is worth one price, and one price only, and that that one price is engraved in stone.  People inside real estate, on the other hand, know that the market value of a home falls within a range of likely sales prices.  They know that where the actual sales price falls within that range depends on how well-presented the home is. 

List price is part of that presentation.  This particular home's listing agent tells me she suggested to the seller that he list his home at $895k so multiple offers would bid the sales price up to the high but not inflated end of its market value, about $950k.  Instead, the seller insisted on listing his home at $949k so that "people will bid it up to $1M".  Great idea, right?  Mindless robots known as home buyers reflexively bid up the list price to a sales price far above the home's true market value because "everyone knows" that's what those dumb clucks will do.  Greedy seller and unscrupulous agent do high fives as they lead yet another real estate consumer to ruin.  Curtain falls on yet another tidy morality play. 

"Everyone knows" this is how real estate is rigged.  But funny thing is, it ain't happenin'.  What is happenin' is a home that would've sold at the high end of its range, about $950k, if priced at $895k, hasn't sold because it's listed at the high end of its range, about $950k.  And the longer this home sits, the more likely it is that this home will sell at the low  end of its range, probably around $925k.

If this was Perkins' home, which price do you think he'd like it to sell at?

Here's another funny thing.  In Silicon Valley, where both Perkins and I live, the markets hardest hit by foreclosures by far are the markets where under pricing and over bidding were least likely to occur.  For example, in Palo Alto, scene of legendary over bids in 2005, one in 1487 homes is in foreclosure the last time I checked RealtyTrac's Web site.  In neighboring East Palo Alto, where over bids were far less common during the boom, one home in 70 is in foreclosure. 

Let's use MLS data to confirm this negative correlation between high over bids and high loan defaults.  The average over bid in Palo Alto in 2005 was 4.84%; in East Palo Alto it was 1.91%.  And I'm willing to bet that most of those East Palo Alto "over bids" went right back to buyers as seller credits for non-recurring closing costs, generally 1 to 2% of the purchase price, wrapped into the sales price, something legal, customary and necessary in a market of cash-strapped buyers.  I'm also willing to bet that none—zero—zip—of those Palo Alto over bids went back to buyers as credits in that far more competitive market and far more affluent city. 

Different markets, different buyers, different ways of doing business.  Even different ways of setting the list price.  One of those things "everyone" doesn't  "know".  Even some people who should.

Well, I could go on, and on, and on, as Perkins did, but let's stop here, because now we've stumbled on the real problem with the media that, I suspect, fries industry bigwigs even more than "nattering nabobs of negativism":  only a handful of real estate reporters seem to know much more about real estate than the general public they're paid to inform. 

Perhaps "handful" is generous.  Only a miniscule portion of the media shows the sophistication and insight that adds value to their real estate reporting.  Sometimes they subtract value.  And if this sounds like blanket condemnation, here's the carefully assembled evidence:

Envy, nuanced markets and pajama journalism.

A voice crying in the wilderness.

Another big (and direct) hit from "60 Minutes".

Is home buying conspicuous consumption?

A look back at 2006, and a look ahead.

When Perkins accuses the industry of denial, it reminds me that both the farce and professional tragedy of the reporter covering a story whose nuances largely elude her is that the missing nuances make all the difference.  Nuances are the difference between outstanding reporting and average or mediocre, between "fair, unbiased and balanced" and "everyone knows".  Sure, no matter how hard she tries, some people will always point out to her that she's making a hash of her reporting, but since they're the people who know the nuances of the story, this invariably means that they are  the story.  So of course they can't be "fair, unbiased and balanced".  Like she is.  So of course she can sanctimoniously ignore any criticism.

Errors in their coverage rarely stop reporters from proclaiming themselves as the unassailable guardians of the public's right to know.  Any criticism of the media's real or perceived deficiencies is, as Perkins tells us, "media censorship" and son, that's "unconstitutional".  So let's all salute the average reporter, on a tight deadline and with little insight into the story of the day just dumped on her desk, as she wraps herself in the First Amendment. 

Read enough of her work product and eventually it dawns on you that the average real estate reporter makes a living in part by regurgitating press releases.  Regurgitating press releases from the industry, which convinces industry critics that the media is the willing tool of the industry.  Regurgitating press releases from critics of the industry, which convinces the industry that the media is the willing tool of the critics.  Regurgitating press releases from organizations that simply track and comment on the industry and have no obvious axe to grind. 

Press releases.  Lots 'n' lots o' press releases. 

And if it's not press releases, it's scrolling through the ol' database to find an "expert" or two to call for a quick quote.  Or, keeping up with the times, lifting a quote off a Web site.  But shoe leather—the old-fashioned and best way to get the story and, not coincidentally, the very resource I expend when I'm out in the real world with real buyers and real sellers—shoe leather, I say, seems to have fallen out of favor with the traditional media, while the bloggers don't know it ever existed.

There's nothing inherently wrong with regurgitating press releases and spicing them with a short quote or two, as long as the real estate reporter resists unconsciously or consciously fleshing out her story with a few swift kicks to the industry's groin.  And it's okay as long as the "fair, unbiased and balanced" real estate reporter resists the easy role of pundit and bombastic moralizer because, hey, "everyone knows" the industry is dirty.

But I wonder how strong the market for regurgitated press releases will be as the Digital Age slouches on. 

Maybe I'm typical.  Years ago I faithfully read Perkins when he wrote for the San Jose Mercury.  Today, now that he's online, I rarely read him.  I still think he's at least an adequate reporter.  Solid and steady if unspectacular, Perkins does sometimes indulge in the biff! ker-pow!  language of the action hero comic strip.  Markets and economies regularly "take it on the chin" in his column. 

But as I ponder this, I realize that all I use Perkins for these days is as a kind of RSS news feed.  I scan his article for links to the press release or study he's summarizing, then read the linked material instead. 

And someday I'll break down and get a real RSS feed.  And there are plenty of people who already have.

Which brings us face-to-face with the sad fact that Perkins' "traditional journalism media", with its genuine or ostensible impartiality, its steadily declining readership, and its public credibility rating in the basement right next to the real estate industry it often loathes, is withering away.  Lost amid the furor over Rupert Murdoch's recent purchase of The Wall Street Journal—which, if my mercifully brief exposure to Fox News is any indication, means that its readers will now get a steady diet of hard-right politics, soft-core porn and flag lapel pins—was the media analyst who insisted that the Journal's  staff "should be glad  Murdoch is buying them.  He's the only thing that's going to keep their newspaper going." 

Yeah, but as what?

And if this is the grim future of perhaps the country's most reputable and highest-profile traditional media outlet, how much more is it the future of the rank-and-file traditional media reporter?  The rank-and-file reporter who, thanks to the Internet, is no longer the gate-keeper of information.  The rank-and-file reporter who, restrained (at least in theory) by traditional journalism's ethic of balanced coverage (which "perhaps...a bad-apple minority" conveniently forgets as soon as it gets a byline) is hindered from pandering to the prejudices "everyone knows" are true, and from the cheap punditry that makes the blogs such popular forums for misinformation.

A grim future indeed.  A future grim enough perhaps to prompt one journalist to take mouse in hand to strike a mighty blow for traditional journalism. 

Such as it is.  While it exists.

copyright © John Fyten 2007        Site Map         Home