Bubblehead trilogy:  the messenger.

Inside the head of the head bubblehead.

In the other parts of the bubblehead trilogy, The Movement and The Manifesto, I look at the bubblehead movement and at the statement of its core beliefs.  Now I'll look at the proto-bubble blogger himself, and still the most read of that breed.

All of us have occasionally wondered if there was a bogeyman under our bed.

Before the Information Age, we had two choices.  We could suffer in silence, too embarrassed to ask for help.  Or we could look under the bed and find that the bogeyman had either gone away or never existed.

But now the Internet's "ease of information transfer" gives us a third choice.  We can go to a bubble blog, where someone who's never looked under his bed will warn us never to look under our bed either, and describe the bogeyman to us in gory detail.

You'll find many bubble blogs these days but one stands out.  It's "the top-ranked Google result for 'housing crash' and 'housing bubble' for 3 years running".  I won't mention its name but it's easy to find and you'll know it when you do.  I'll call the blogger "Sage".

To the many bubbleheads who hang with him, Sage is a refreshingly unorthodox thinker with refreshingly unorthodox opinions on that over-hyped snare and delusion to the unwary, homeownership. 

To the handful of real estate agents who've seen a bubble blog, Sage must look like their worst nightmare. 

To me, Sage is neither nightmare nor prophet.  Instead, Sage is simply impressive testimony to the power of the blogs, an Alert Citizen who until recently would've been limited to fulminating in the Letters section of his local newspaper.  In fact, Sage has written at least two letters to the editor, one alerting us to the perils of starting barbeques with lighter fluid, the other alerting us to the perfidy of Microsoft programmers. 

Sage advanced with the technology, moving from Ed. to Amazon.com, where instead of being "top-ranked" he's "reviewer rank 41453".  Amazon must be a tough room.  While at Amazon.com Sage alerted us to the perils of buying Black & Decker products and to the perfidy of Wells Fargo. 

Today he's a pop prophet and loose cannon wannabe, alerting us to the perils of homeownership and to the perfidy of the real estate industry.

Sage is nothing if not alert to peril and perfidy.

Let's examine Sage, pioneer bubble blogger, conspiracy theorist deluxe and top-rated source of simple and reassuring answers to complex and troubling questions. 

Sage practices what he preaches:  "save a fortune by renting" until "housing costs half as much".  This central tenet of the bubblehead faith—economics' version of "keep yourself barefoot and pregnant"—isn't leading edge:  it could have come from the California Association of Apartment Owners.  It could also have come from a Wall Street that until recently has been feeling neglected by all the hoopla surrounding (and cash flowing into) real estate.  This isn't avant-garde thinking.  No, it's more derriere-garde. 

But nineteenth-century thinking makes Sage one of "the new real estate sages" according to a regular contributor to sfgate.com, online version of the San Francisco Chronicle.  Heady praise indeed for a modest, retiring guy whose message is unoriginal and, as we'll see, inaccurate.  But celebrity is easy to come by these days.  And if you're wondering what qualifies this sfgate contributor to anoint real estate sages, it's a "best-selling" book on how to choose your career.  Credentials?  You don't need no stinkin' credentials to pontificate online on real estate.

That the Chronicle  would walk on the wild side with the bubbleheads shows how big that newspaper thinks the movement is, and how desperately it wants to be relevant to a demographic that's fleeing old media like a burning building.  Apparently journalistic standards spiral downward with ad revenue; yellow journalism is just the thing to perk up an ailing circulation.  But the Chron can save its server space:  it's an article of faith among bubbleheads that the old media is just a mouthpiece for the National Association of Realtors.  That the real estate industry regularly accuses the old media of being a mouthpiece for the bubbleheads suggests that at least a few journalists are doing it right—reporting things neither side wants to hear—and getting blamed instead of thanked.  It's the balanced reporting both sides say they want, but real estate is now so polarized that the bubbleheads prefer "the prejudice, the flippancy, and the violence of the platform partisan". 

Real estate:  now it's personal.

To someone accustomed to the superficial gloss of the old media, Sage is an unlikely celebrity:  a quart low on charisma, not particularly articulate, more than a little naive, and stalking the housing crash with deathwatch earnestness years before it happened.  Meet citizen journalism.  It’s a little like F*cked.com throwing rotten tomatoes at dot-com as it collapsed, but without the edgy humor—or any humor.  Instead, the tone is “engineer with a burr up his butt”. 

But whatever his shortcomings, Sage and other bubble bloggers are rallying points for bubbleheads who don't think they're getting the full story.  Admittedly, those looking for strict impartiality from the National Association of Realtors® will be disappointed, although I'm not sure why anyone would be shocked—shocked!—that an industry trade group is cheerleader for its industry.  And sure, agents will always say "now is a great time to buy", but those of us who've seen the market go through an entire cycle or two actually believe it.  We know that there is no risk-free time to buy, only different markets with different buying opportunities.  Just ask the brave souls who bought Silicon Valley homes late in 2001 when the world in general, and Silicon Valley real estate in particular, looked like it was going to hell in a hand basket.  They'll lose their home equity about the time we're all standing in bread lines.    

What's the secret of Sage's appeal?  Aside, that is, from telling bubbleheads what they want to hear? 

Maybe it's because Sage was the first-est with the most-est; 2003 goes back to the pre-history of blogdom.  Or maybe it's the Craigslist effect:  low sparkle-and-zip equals high perceived credibility.  Or maybe we've entered the realm of the political scientist, because Sage may be the 'net's version of that ancient Greek feature, the demagogue.  "A speaker who seeks to make capital of social discontent."  But in deference to his medium, maybe we should call him a "netagogue". 

Let's look at Sage more closely, his history and his message. 

Why not examine his credentials?  "Credentials"?  Now there's a trip down memory lane:

"Gee, Grandpa, tell us about 'credentials'."

"Well son, in my day, you had to have some kinda training and experience before anyone took you seriously.  But these young whippersnappers today think all they need is some blogging software and a beef."

"That's swell, Grandpa.  Now tell us about meeting Abraham Lincoln."

But if Sage gives us no credentials to examine, he does give us his history.  That's good information because, as proto-bubblehead, Sage's story is the story of many.  Sage is an exemplar.  I've never met Sage, even though we live in the same city and at one time may have worked in the same building, but I've met his brethren.  I've even unwittingly worked with his brethren, oh yes I have, back when I thought that anyone who couldn't drive past an open house A-frame was a red-hot buyer.  I know them better than they know real estate.  I may even know them better than they know themselves.

Sage tells us little about himself except his full name, which he sews liberally across the Internet, perhaps to build the brand.  So with some casual Googling we can piece together his humble beginnings and meteoric ascent.  We can get inside his head and, in doing so, get inside the heads of the bubbleheads. 

Sage moves here from Chicago in 1997 at age 32, and like many new arrivals to dot-com Silicon Valley, he's a young computer engineer with an Internet start-up.  And like many new arrivals, he rents, and in Palo Alto, the navel of the dot-com universe.  But don't add "dot-com" to "Palo Alto" and get "real estate irrational exuberance", at least not in 1997, because Sage's introduction to local real estate was low-key and non-threatening.  1997 was a good year for Silicon Valley real estate but not a great year, merely an early step in the comeback trail from the depressed market of the early 1990s.  If he noticed or cared, Sage would have seen a market that still favored buyers slightly. 

But Sage wouldn't have been the first new arrival sent reeling out the door by sticker shock.  I wondered then if the recruiters and HR departments really leveled with their new hires about Silicon Valley's stratospheric cost of living, because newbies were always blown away by our home prices.  What they'd owned in Chicago or Shaker Heights was positively palatial compared to what they could buy here, even with a bigger salary and generous stock options.  And then prices went up like a rocket in late 1999 and 2000, slamming the door even harder on even more of them. 

Now, you don't need a Ph.D. in sociology to know that any group whose only view of Opportunity is as it leaves town without them is going to a) start thinking it's been screwed, and b) start looking for the "they" who did it.  And to reassure this group that it's a victim—that nothing it did or didn't do caused its downfall—the "they" must possess supernatural powers of coercion strong enough to bend iron and stop the world on its axis.

It's the simplistic, pre-scientific world view preferred by nine out of ten cavemen.  Thunder comes, not from unstable warm air, but from angry gods.  Rising home prices come, not from more and wealthier buyers chasing few and fewer homes, but from the venal machinations of "they". 

Three "theys" lurked in the dense underbrush of dot-com Silicon Valley real estate.  One was greedy sellers but hey, most buyers recognized that they too would be greedy sellers, given the chance.  This left shady real estate agents, highly-organized forces of evil who pushed prices up and up beyond all reason.  It also left their running dogs, credulous buyers.

But all the conspiracy theorists had to do to find "they" was look in the mirror.  They were "they"—yes!—flooding Silicon Valley with their new money, driving up our cost of living and, with it, our cost of housing. 

Most either got over it and bought or left.  Sage did neither, which makes him something of a museum piece.  Meanwhile, home prices have nearly tripled since Sage hit town back in 1997.  Then the median sales price of a Palo Alto single-family home was $562k.  By 2006 it had climbed to $1.340M, as Sage sat with his feet up, patiently waiting...waiting...waiting for the inevitable day real estate would self-destruct.

That's some serious home equity Sage missed out on.  Seven-hundred seventy-eight thousand United States dollars and no cents.  Whiffing this badly when so many lesser mortals grabbed the brass ring might seem to cast doubt on his status as "real estate sage".  With $112,400 (20 percent) down, that's a tidy 31.74 percent annualized return on equity that the all-seeing Sage didn't see coming.

"Yeah, but it was a fluke."  I don't think so, but who cares?  It happened. 

"Yeah, but it'll never happen again."  The glass-half-empty brigade always say that after a boom, but if they're right this time, then all the more reason all-knowing Sage should've gotten in while the gettin' was good. 

This may explain why Sage believes so strongly that current home prices will fall by half.  It also raises some impertinent questions.  If Sage thinks the median Palo Alto home sold in 2006 is really only worth half—$670k—its current value, then why didn't he buy at a Sage-approved $670k when he could?  Why didn't he buy in 1997?  Too early?  Needed to get his feet wet?  Okay.  Then why didn't Sage buy in 1998, when the median sales price was only $628k?  Or why didn't Sage buy in 1999, when the median price was $715k?  Or why didn't Sage buy as late as 2001 when he still could've picked up something nice in Palo Alto for his target $670k?  Even in 2003, the year he launched his bubble blog, Sage could easily have bought the two-bedroom home he's renting now at a sound and prudent $670k.  Why do the fundamentals support $670k today, but not when homes were selling at $670k?  Is this profound insight?  Or is it just 20-20 hindsight?

What was Sage up to in the late 1990s?  I don't know, but I do know that even in 1998 people would occasionally sidle up to me at an open house and smirk, "we both know prices are inflated, it's all hype, and it can't last".     

Sage is an engineer, which reminds me that there's a type of buyer, always a numbers-cruncher, who wants the market to slow down so that he can take it over to the light and have a good look at it.  But the market never slows enough, which leads to this conversation ripped from the pages of real life:

Agent:  "That house you wanted to make an offer on?  The listing agent just called.  They're getting an offer tomorrow.  We need to meet."

Engineer:  "But I can't make an offer.  I haven't finished my spreadsheet."  (Rim shot.)

The problem with this picture of the engineer going through life with his parking brake on is that many successful buyers in my fast-paced and highly-competitive market are engineers.  Apparently there's a difference between the belt-and-suspenders type who won't move until every last part is tested a thousand times, and the first-to-market type willing to trust his gut and take a chance.  You probably want Belt-and-Suspenders working on the shuttle program.  You probably want First-to-Market getting your start-up's new gizmo out the door before your competitor does or it's obsolete.  You definitely want First-to-Market as a buyer.  But Belt-and-Suspenders seems to personify most numbers-crunchers.  His literalness and fascination with the microscopic machinery of the market keeps him from seeing the nuances that lubricate it.  Putting along in the slow lane, old Belt can't see the forest for the trees. 

Sage next appears in 1998 as the author of a book on how to improve Web site performance.  It didn't make the New York Times  best-seller list, but it did sell well enough to be reprinted in 2002, and even today plenty of online retailers will sell you a new or used copy.  What do you know?  Once Sage wasn't just a media-anointed "sage".  He was a genuine expert.  Maybe that's part of the problem.

I'll quote something Tom Wolfe heard and passed along:  "An intellectual is a person knowledgeable in one field who speaks out only in others."  Tom, intellectuals aren't the only ones who feel comfortable straying into unfamiliar territory.  Let's substitute "bubblehead" for "intellectual" and listen to what else he has to say.  The bubblehead needs "no particular education, no scholarly training, no philosophical grounding, no conceptual frameworks, no knowledge of academic or scientific developments other than the sort of stuff you might pick up in Section 9 of the Sunday newspaper [or on the Internet].  Indignation about the powers that be and the bourgeoisie fools who did their bidding—that was all you needed.  Bango!  You were an [expert]."  The bubblehead is "inseparable from his necessary indignation.  It was his indignation that elevated him to his plateau of moral superiority.  Once up there, he was in a position to look down at the rest of humanity [home buyers and agents].  And it hadn't cost him any effort, intellectual or otherwise."

Wolfe's pyrotechnics are tough to follow, but let me put the idea my way.  Many of us reach a fork in the road, a decision point that triggers an almost Biblical temptation.  It's when we think hey, I'm really good at what I do.  Because from there it's a short step to hey, I'm really good  period, end of discussion.  Most of us get through this moment with our heads the same size because somehow we understand that knowledge is a house with many locked rooms, and that whatever specialized aptitude we have unlocks only one of those rooms. 

Or success can have us thinking that no room is locked to us.

1999 finds Sage quiescent, but in 2000 he has his Saul-on-the-road-to-Damascus epiphany that not only converts him to the bubblehead faith but makes him one of its leading proselytizers. 

In a recent interview, Sage says that in 2000 he offered $500k "without inspections" on a Berkeley house listed at $400k "and got outbid".  The story is common to the dot-com wars.  Losing in multiple offers is a huge emotional letdown and, I suspect, a serious kick in the ego.  And that's just from the agent's point of view.  Most buyers pick themselves off the floor and try again; some don't. 

But what's surprising about this story is the alleged quality of Sage's one and apparently only offer.  I'd like to see it—there's more to a good offer than price or inspections—but a buyer willing to offer 25 percent over list usually doesn't pack up and leave after just one try, let alone do a scorched-earth retreat. 

And in shifting his focus from go-go Palo Alto to laid-back "Bizerkley", Sage reveals a bit more about himself.  Both are university towns with progressive traditions, but the Silicon Valley culture of Palo Alto, which doesn't diss you for making a buck while changing the paradigm, has left it with only a trace residue of 1960s counter culture.  Berkeley, on the other hand, is its local flagship.

Berkeley is also considerably cheaper than Palo Alto.  Palo Alto challenges the numbers-crunchers because it doesn't look good on a spreadsheet.  You pay big bucks for dumpy homes in ordinary neighborhoods—and that's affordable Palo Alto.  This leads to the perception among some that only fools, whipped into a frenzy by unscrupulous agents (those "they" again), pay Palo Alto prices.  "They" are up to their old tricks, stirring up the marketplace, ruining things for ordinary God-fearing folks.  Somehow the people who buy this comforting delusion never connect the fact that they and all their friends really really want to live in Palo Alto with the fact that Palo Alto is really really expensive.  Some of these people profess to understand the economics of real estate.

That fateful rebuff in 2000 affected Sage in two ways.  First, it drained him of any enthusiasm for homeownership for at least six years and, according to the interview this anecdote comes from, probably for another five as well.  That's what they call a "pivotal event".  

Second, it helped Sage develop his manifesto, his belief structure about homebuying and homeownership.  But don't go there yet, because it'll be instructive to review what Sage took away from his brief and unsuccessful brush with homebuying.

According to the interview, "the numbers didn't add up."  This is classic bubblehead thinking:  homebuying is all about numbers, not about home.  Real estate is just another financial market; a home is just another financial asset.  The only legitimate emotions in any financial market are greed and fear, and that other emotion NAR keeps mentioning—home—is just industry propaganda foisted on gullible victims.  Left to their own devices, people won't connect emotionally to "home".  But when "they" run homebuying up the flagpole, the weak and credulous have no choice but to salute. 

That's the bubbleheads' story.  Want a simple answer to a complex issue?  Hey, don't we all?  Maybe the whole bubblehead-versus-homebuyer dichotomy boils down to this:  left brain versus right, numbers versus emotion, detachment versus commitment, rationalist versus intuitivist, clinical Mr. Science versus comforting hearth of home, even alienation versus community is there a sociologist in the house?  Neither side understands the other because each side is wired differently.

Which side is right?  I'm won't go there, because then I'd be making the same spurious value judgment the bubbleheads make.  But it does strike me that the elaborate mythology the bubbleheads have had to use to patch together their position suggests that it's more about denial than reality.  On the other hand, it may simply mean that even the bubbleheads—especially the bubbleheads—don't know where they come from.  I wish one blogger was fearless and perceptive enough to stand back, look objectively at the bubblehead position and strip it to its core belief—"we're inveterate speculators who think it's all about the money"—and leave out all the home-brewed inefficient market stuff and sanctimonious moral crusading.  Then the bubblehead position would be credible.  Not right, but credible...or at least honest...or at least not as goofy.  Of course, any blogger who did that would have an audience consisting solely of himself.

"This was when I realized that this was not sustainable."  Here Sage is both right and wrong in the short-term, and flat-out wrong in the long term.  No, the dot-com real estate boom wasn't sustainable.  Booms are never sustainable, just as busts are never sustainable in a desirable place like the Bay Area.  Booms and busts run in cycles.  This isn't advanced economic thinking.  The local real estate market, booming in 2000, was headed for bust.  And whenever we're in a bust, there are always people who say "the market will never come back" and say it convincingly.  They've also said "Silicon Valley will never come back", convincingly, every time it's gone bust over the past thirty years.  Our current recovery marks the sixth time they've been wrong.

Sustainable appreciation?  I don't know how Sage defines it, but if the gullible fools who paid an unsustainable $969k for the median-priced Palo Alto home sold in 2000 still own it, they've done rather well:  it's now worth about $1.340M.   Meanwhile, at some point between now and 2001, the "new real estate sage" gets himself a $350 monthly rent reduction.  Woo hoo!   Let's run the numbers.  Gullible Fools pick up $371k in equity.  Sage saves himself a nice tidy $29k in rent, and that's assuming he got that rent reduction right after his lease expired.  Gullible Fools 1, Sage 0.  Of course, Sage recovers nicely by claiming that Gullible Fools will have to give it all back, but the economy's response to declining and even flattening home prices suggests Mr. and Mrs. Fool will lose their 38 percent appreciation only when all of us—bubbleheads included—are standing at soup kitchens.

The price spike that so alarmed Sage in 2000 is how homes appreciate in an area like ours, an area that can't have enough supply to meet surges in demand because it's been built out for years.   Perhaps Sage thinks that Silicon Valley price appreciation should look like the trend line for the national average home price:  ever so slowly and steadily upward.  Any appreciation more dramatic than this is a "bubble".  Perhaps he doesn't understand that the national trend line is deceiving because of "the law of big numbers":  it's a composite of hundreds of local markets, many experiencing great volatility due to local economic conditions, but which in the aggregate cancel each other out except for a gradual long-term trend upward [until recently].  

According to Sage, bubbleheads are "people like me who would like to buy but don't want to ruin their lives by getting into massive debt."  It's a common sentiment—"I want it all"—but for most of us it's not realistic.  Yes, most homeowners cut their spending in other areas.  Their cars may be older and not as expensive.  Their toys may be fewer, their vacations not as exotic.  But they make these sacrifices willingly because the emotional satisfaction from owning their home is compensation enough.  Their focus has shifted from fancy/toys/adventure to home.  It happens to most of us, sooner or later.  Sage isn't there yet.  He may never be.  That's okay.  It's even okay for him to think that this is corny NAR propaganda.  But it's not okay for him to put down others for thinking and feeling what he doesn't or can't.

And perhaps you've noticed a sense of entitlement.  "I should be able to buy a home in one of the most expensive and desirable places on earth without feeling the pinch."

Sage:  "Everyone has an economic interest in the deal.  No one is on the buyer's side."  Whew, maybe houses should come with warning labels!  It also makes you wonder how a country with a 67 percent homeownership rate for so long has managed to avoid collapse.  This junior-grade cynicism calls to mind the little boy who discovers that Santa Claus doesn't exist and runs with it.  Now not only is the Old Gent a fraud, but so is Christmas and the Fourth of July and Groundhog Day and... 

Yes, there's risk in the real estate market, just as there's risk in the stock market, the new-car market, the plasma TV market or any big-ticket market.  There's also risk in being risk averse.  It's no secret that real estate offers more risk than plasma TVs, but no one will live in a plasma TV for forty years and then sell it for forty times what he paid.  It's that risk/reward thing.

And yes, everyone involved in the sale of a home gets paid.  Everyone involved in renting a home gets paid too.  That's how business models work.  Who do you think should represent buyers, Sage?  Docents?  Could buyers protect themselves by paying their agents up front, by the hour, instead of letting sellers pay agents per transaction?  I'm all for it, but I don't think many buyers will be.  The critics and paradigm-changers don't understand that buyers have bought into real estate model for one reason:  they like it.  Buyers keep coming back to the current business model, not because they're stupid, but because it's to their advantage.  Change the way buyer's agents get paid, Sage, and a legion of grateful agents will elect you NAR president for life. 

No one looks out for buyers?  I know more than a few agents who do, but I'll never convince you of that.  So I'll humor you and say, okay, no one looks out for the little guy—unless, of course, the little guy's interests happen to coincide with a big guy's.  The NAR is a big guy, one of the biggest, and it's doing everything it can to keep homeownership compelling.  Then there's that other big guy, the Federal government, the biggest guy on the playground, who for seventy years has helped homeowners with perks like tax advantages and insured loans.  These are good guys for a little guy to hang with. 

But who looks out for the little guy, especially renters?  Do renters have a powerful lobby?  Not unless they live in one of a handful of rent-controlled cities.  But landlords do have a lobby, and it's one of the biggest in the state.  They're very big guys, but they're on their side, not your side.

Sage surveys the battlegound and calmly offers this advice:  "Rent and watch and enjoy, 'cause now it's our turn."  Hold it!  I'm getting this idea for a fable.  I call it "The Ant and The Grasshopper".  This is exactly the stuff bubbleheads want to hear, because this is exactly the stuff bubbleheads want to do.  Bubble-think miraculously transforms inertia and paralysis into cunning strategy.  Yessir, just sit on your (rented) porch with your feet up and the world will come a-crawling.  That's how it always works.  No effort or initiative necessary.  But since a chart on Sage's home page shows Craiglist's asking rents rising steadily (and actual rents have been going up since 2005, according to MLS data) you have to wonder how often Sage looks at his blog or fact-checks his thinking. 

Which brings us to the awkward truth that everyone seems too polite to point out:  Emperor Sage has no clothes.  Let's forget for a moment that Sage has no industry experience; neither do the real estate academics (and what a swell job they do!).  Let's also forget for a moment that Sage is self-taught; at least the academics have to get through grad school.  Let's not forget for one minute that Sage hasn't had any homeownership experience in the past nine years, if ever.  Let's also not forget, even for a second, that the sum total of his real estate experience is apparently one unsuccessful offer. 

Yet Sage is a "real estate sage". 

As they say here in Silicon Valley, "Are you kidding?"

This is a little like a guy writing an advice column on dating who's had just one date in nine years...and it didn't go well...and now he thinks dating is highly overrated...in fact, he recommends that you drop out of dating until sanity returns to the dating experience...and honest, this isn't sour grapes, just disinterested science. 

"Yeah, but he's really interested in dating.  He's researched it a whole lot.  You should see his spreadsheets." 

The analogy between dating and homebuying isn't a stretch.  People "fall in love" with a house, preferably one with "sex appeal".  They need to bond emotionally to a house before they can make a commitment to it.  Did I just prove that homebuyers are emotional twits?  I guess it depends on whether you think emotion can be a legitimate, positive and reliable guide.  Did you spreadsheet your spouse before you proposed? 

Resolutely turning his back on homebuying in 2000, Sage rents a two-bedroom house in Menlo Park for $2700.  He and his family of three apparently still live there.

At some point Sage leaves the Internet start-up that brought him to Silicon Valley for Sun, then moves to "a major online brokerage" he initially refuses to name but later identifies as Charles Schwab.  Well, somehow we knew it wasn't an online real estate brokerage.  It's interesting that Sage works for Schwab, and that another top bubble blogger calls himself a securities broker.  And the securities market is the market hurt most by the real estate boom, with money hemorrhaging from it into real property.  Does Sage have a conflict of interest? 

Depends on whether you believe in innocent coincidence.  Sure, Sage is just a programmer, just support staff, but when bubbleheads say that anyone in real estate is automatically too close to the industry to be objective, and when two of the leading bubble bloggers work for the industry that's real estate's biggest competitor for the small investor's dollar, and when not one of the hordes of conspiracy theorists swarming their blogs says "isn't that interesting"...well, isn't that interesting?  No double standards here.

In 2003 Sage launches his blogging career and begins warning that the end is near.  Real estate doesn't collapse catastrophically in 2003, or in 2004, or in 2005, or in 2006, and in 2007 it's still booming in his neighborhood.  In fact, the Menlo Park market west of 101 is sizzling.  But Sage is just being a good sport.  He's giving real estate a very long head start.

Mysteriously, Sage remains a mass media wallflower until mid 2005.  Why no interest in this pop prophet?  Sage hints darkly that revenue from real estate advertising has corrupted the local media.  When confronted with this accusation, the editor of his local newspaper retorts that she's never heard of him. 

But in June 2005 Sage gets brief mention in a Time/CNN online story culled from a Time Magazine article which notes that some are "finding value in the rental market".  Sage tells Time he rents a two-bedroom house in Menlo Park "for $2350 a month—a 13% cut from the $2700 he paid when he moved in five years ago".

2006 finds the mass media finally noticing bubble blogs, and this rising tide raises Sage's profile.  One source of interest is unlikely:  Verde  Magazine, the project of a local high school journalism class.  Sage kicks off the interview in typical fashion by asserting that while homeowners are in denial about falling prices, "Those who don't own are more inclined to take a balanced view.  They're not invested in one point of view.  In fact, they're not invested at all."  Here we find not one but two, count 'em, two, fallacies.  First, homeowners in his area are in denial about falling prices because prices aren't falling [they wouldn't fall until late 2008].  And bubbleheads are fully invested, both emotionally and financially, in the "bubble".  In just a few moments Sage will conveniently confirm this for us.    

Sage shows off his sturdy independence by declaring "...I sure won't buy a home just because Realtors tell me I should."  It's the featured quote, set off in its own box, and I can see why this ringing denunciation of authority speaks so strongly to teen-age journalists feeling their way through the minefields of knee-jerk adolescent rebellion.  Most of us outgrow it.  Some don't.       

Sage lays some advanced bubble theory on our youthful reporters that seems fuzzy even by bubble blogger standards:  even though the price of Bay Area homes has gone up substantially since he began blogging in 2003, their value has actually gone down.  Sage is quoted as claiming that "If you bought an expensive house in the mid 90s (sic) and you decide to sell it and move to Florida 30 years later, you're going to get a very nasty shock when you find out that the property you thought was rising in value over time has actually gone down in value.  It's worth it to know what your house is really going to be valued at down the road."  I for one would certainly like to know what my house will be valued at thirty years from now or, failing that, next month.  I'd also like to know what brand of crystal ball Sage recommends.   

Maybe something got lost in translation here, unless Sage sees Weimar-like inflation in the future.  But his reference to retiring to Florida is revealing.  It strikes a false note, like an outsider mispronouncing a local street name.  Who retires from Silicon Valley to Florida?  I asked my wife, and in the combined 103 years we've lived here (jeez) we couldn't think of one person who's made that move.  I do have two Minnesota cousins who retired to Florida.  That's only our experience, of course, but we've seen lots of people come and go over the years and it does suggest that leaving Silicon Valley's perfect weather for Florida's heat and humidity isn't typical Silicon Valley behavior.  But having lived in Florida, I can tell you that leaving Midwestern snow for Florida sunshine is typical Midwestern behavior.  And remember, Sage is from Chicago.  And remember, one of the benefits of homeownership is that it encourages people to put down roots in the community.  Renter Sage may live in Menlo Park, but apparently his frame of reference is still Chicago.  I wonder where he keeps his snow shovel?  

Verde  quotes Sage as saying that "rental rates are staying more or less the same" at a time when his blog showed rents up 10 to 15 percent.  I guess the key phrase here is "more or less". 

Sage surfaces next in September 2006, in a piece of arrant Internet flackery called PRWeb® Press Release Newswire, which has him ruminating "the mania we had in housing was actually a painful thing for a lot of people.  They watched their friends seem to get rich..."  Gosh, isn't this interesting?  Remember, Sage just claimed that bubbleheads are "not invested" in the "bubble".  They don't feel "painful" emotions like envy and jealousy.  No, they're above that.  That's why we can count on them "to take a balanced view" of real estate. 

He goes on to reflect nostalgically that "I was reporting (the crash) long before it was even true".  This reminds me of the economist who predicted the 2001 recession...and the 2000 recession...and the 1999 recession...and the...  The secret to omniscience is to keep throwing those predictions against the wall.  When and if one sticks, be sure to mention it in your resume.

NPR tracks down Sage for a November 2006 PBS blog article on bubble blogs (yes, blogs are reporting on blogs, a sure sign the end is near and not a moment too soon).  I won't quote from the interview, since it's the usual bubble stuff, but the reader comments that follow are interesting.  "Who are you going to trust, a person who is paid on commission telling you to 'buy now or be priced out forever', and telling you to take a toxic interest-only loan, or are you going to trust a community of people, sharing their views about what is really going on?"  By now I think you might ask, "Do I get a third choice, please?"  And note the telling admission that this "community" is "sharing their views", not their experience.  Which do you think would be more useful?  Which do you think is more comforting to the priced-out and paralyzed?

Another poster turns bad second-hand information into bad third-hand information by quoting the Sage Manifesto verbatim to explain what's wrong with real estate.  Then someone will quote her, turning bad third-hand information into bad fourth-hand information, and so on, and so on...and pretty soon everyone gets to feel like an expert without dipping a toe in the market.  More of that "ease of information transfer".

Here's one of the more heart-tugging sub-plots on the blogs, the agent who supposedly comes clean and steps forward to spill the beans:  Hi, my name is Malcolm.  "I was one of those who made a ton of money in real estate.  The fundamentals made absolutely no sense when people purchased my homes at 3 times what I was paying" in rent.  Thanks for sharing, Malcolm, but I gotta say, your confession is a little suspect.  First, I'm supposed to believe that you were making "a ton of money" and renting?  Okay, could happen.  Second, you talk about your real estate career in the past tense.  Is it conscience that keeps you from selling overpriced real estate these days, or is it unpaid bills?  Are you shunning Moloch to meditate in the desert, living on locusts and honey?  Or did you discover that real estate is a lot harder than it looks and go find yourself a nice easy 9-to-5?  No one is more willing to point the accusing finger at real estate than the agent who couldn't make a living in it.  Then it's not his fault.  "I was too good for real estate" is always an ego-saver.

Finally, we'll look at Sage's most recent appearance in the press, a February 2007 interview posted on the Inman News Web site.  Here, in hostile territory, he breaks down and confesses:  "Most renters are neutral...But there is a small contingent of renters-by-choice who are adamant bubble believers and have made a big bet on it by renting.  I'm one of them."  Of course, this flatly contradicts his earlier assertion that "those who don't own are more inclined to take a balanced view" of real estate; I think we can all agree that "balanced view" and "adamant bubble believers" don't go together.  And note his reference to "a big bet".  Looks like bubbleheads really are "invested in one point of view", financially as well as emotionally.

Sage adds "I don't think there are any areas that are still inflating".  First, note the bubble-speak:  home prices don't rise, they "inflate".  Second, home prices went up in 71 of the country's 149 largest metropolitan areas in late 2006 and 14 had double-digit increases, according to the National Association of Realtors.  In California during the same period, 171 of 364 cities showed an increase in median price according to DataQuick and the California Association of Realtors. 

"I can rent a million-dollar home for a little over 2 percent per year, but cannot borrow $1 million in cash for 2 percent.  It would cost more like 6 percent...This proves that buyers are overpaying for houses by about a factor of three in the Bay Area."  What's interesting about this assertion is that in his Manifesto Sage claims that Bay Area home prices should be only half what they are, which would reduce them to 1998 levels.  But here Sage goes further, claiming that home prices should be only a third, which would drop them all the way to 1994 levels—which in the Bay Area is essentially late 1980s levels.  So what's your target date, Sage?  1998?  1988?  1888?  Well, Sage, it's been said that consistency is the hobgoblin of foolish minds and, besides, we're only talking about a discrepancy of 50 percent.