This just in! Home prices falling!
Meet this week's winner of the Day Late and a Dollar Short Award.
Just when I was wondering how the mass media could make its real estate reporting any more irrelevant, KGO-TV business reporter David Louie informs us that "a new report suggests the slump in home prices has arrived in San Jose". Someone should tell him—and thousands of agents, buyers, sellers and casual bystanders could—that this was breaking news two years ago.
In his February 3 report, "Plunge in South Bay home values", Louie tells us that "in zip code 95122, the median price has dropped almost 45 percent in the past year", and the drop has been nearly as steep in three neighboring San Jose zips. His source, Zillow, announces that "San Jose now joins the housing slump that already hit other parts of the Bay Area".
Why did San Jose finally condescend to join the party? "People were losing jobs across the board, the technology sector was hit for the first time, and people in high-end homes with a large income were hit the first time they saw their portfolios start to decline. That keeps buyers off the market," says a Zillow spokesperson who sounds like she read this off a note card handed her five minutes before.
Zillow and the mass media: a marriage made in heaven, and a veritable smorgasbord of misinformation. With so many choices, where do I start? How about at the beginning?
I don't know where Zillow and Louie were back in early 2007 when sales in affordable San Jose neighborhoods like 95122 slowed to a crawl and the first short sales, precursors to foreclosure, began to appear. But by most definitions, this was when "San Jose join(ed) the housing slump". In fact, this was when San Jose's affordable neighborhoods helped lead the Bay Area's housing slump.
I don't know where Zillow and Louie were as 2007 wore on and the first bank-owned homes showed up in affordable San Jose neighborhoods like 95122. These too might have indicated to the keen observer that San Jose had already "join(ed) the housing slump".
I don't know where Zillow and Louie were in late 2007 as home prices in affordable San Jose neighborhoods like 95122 began to tank, the trickle of short sales and bank-owned homes became a torrent, and the emerging subprime crisis cut off the few buyers still active from their financing.
I don't know where Zillow and Louie were throughout 2008 as affordable San Jose neighborhoods like 95122 turned into 21st century Oklahoma Dust Bowls, with an exodus of foreclosed homeowners, sky-rocketing default rates that promised still more foreclosures, sales (if any) dominated by bank-owned homes, and a pipeline of short sales, tomorrow's bank-owned homes, that stretched as far as the eye could see—an economic and social disaster of Grapes of Wrath proportions that's fallen disproportionately on neighborhoods like 95122. A story that, despite the media's drumbeat of foreclosure has, at least in the English-language press, been remarkably under-reported, perhaps because it resists fitting into a sound bite.
I don't know where Zillow and "Scoop" Louie were over the past two years as this historic disaster unfolded. I do know where they were on February 3, 2009: This just in! Home prices falling!
This just in! Germany surrenders!
The icing on this cake is Zillow's explanation of what's caused home prices in these neighborhoods to tumble. Not a peep about the subprime and/or "option ARM" and/or 100 percent financing endemic to neighborhoods like 95122 from 2005 to early 2007, its sudden withdrawal in late 2007 and the catastrophic effect this had on neighborhoods already showing serious weakness as early as summer 2006. Not a peep about 95122's loan default rate which, along with neighboring 95116, leads all Santa Clara County zip codes at over 10 percent. Not a peep about 95122's sales prices falling all the way back to 2000 levels.
No, not a peep. Instead we get some corny licks about "the technology sector", as if these neighborhoods were bought largely by IT professionals instead of the working class. Sure, everyone here hurts when tech hurts, but a look back at the 2001 tech bust tells us that San Jose's affordable neighborhoods fared far better then than techie-magnets like Palo Alto and Menlo Park. In 2001 Palo Alto prices declined 11 percent, while 95122 prices went up 11 percent. Anyone still wondering if these are different markets?
And what do the stock portfolios of "people in high-end homes with a large income" have to do with home sales in the most entry-level of entry-level South Bay neighborhoods? Neither Zillow nor Louie seem to understand that not every Silicon Valley neighborhood is driven by tech and stock-market wealth. Hey, San Jose is Silicon Valley and Silicon Valley is Silicon Valley, right? Wrong. San Jose's affordable neighborhoods were already on the ropes even while the stock market went from strength to strength. As 2001 proved, the real estate market in San Jose's affordable neighborhoods, like the real estate market in every affordable Bay Area neighborhood, resembles places like Bakersfield far more than places like Palo Alto.
But the piece de resistance of this tour de force was the final shot of a pleasant tree-lined neighborhood street. Now, I haven't driven all the streets in these zip codes, but I've driven enough—I was down there as recently as two weeks ago looking at bank-owned homes—to know that KGO-TV's camera crew probably had to look long and hard to find a pleasant tree-lined neighborhood street. Why make the effort? To make a $340,000 zip code look like a million-dollar zip code?
Is this how you get to imply "This just in! Foreclosure hits Silicon Valley's middle class!" without saying it? Does shock-and-awe journalism have a finesse game too? Whoa! How powerful would that be?
For a brief moment a few years ago I thought maybe the media had finally caught up to the real estate story. And maybe it did, for a brief moment, but the challenge of that story, as with any significant story, is that it moves on. Today mainstream real estate reporting still flubs the story it tries to tell, even when it doesn't color it, while missing five or six better stories.
Today mainstream real estate reporting finds itself in that old familiar place: a day (or two years) late and a dollar short.