Pappas Realty Co... "Commercial Real Estate...Exclusively" in Northeast Ohio since 1957

Friday, March 30, 2007

Is The Media Too Invested in Real Estate To Be Unbiased?

Article from "The Real Estate Bloggers" ~

March 29th, 2007 · 1 Comment

Scanning the internet this morning after being awoken (way too early, I may add) by my soon to be 7 year old with a stomach ache, I ran across this article on how to deal with a real estate slump. Besides the gloom and doom that articles of this sort trumpet, there was an interesting point that the wirter made.

The feel that the media is so invested in the real estate market from so many angles that they are unable to report the bad news on real estate and trumpet the positives whenever they appear. While I have never been one to defend the media, in other publications I write for I tend to rip them severely on the bias they carry in politics, I wonder if there is any truth to this.
Is the media so invested in real estate that they will gloss over bad news and hype good news? Is there a bias that can needs a filter when reading business stories.

In the blogosphere there are definately 2 camps, the bubble bloggers and the real estate business bloggers. I try to straddle both sides of the arguments with some success. I see there are weaknesses in the marketplace but I do not feel that they will drive the economy or housing prices off the cliff. At the same time, I do treat the professional journalists with some deference that they are unbiased in most of their reporting on the real estate markets.
Am I wrong to do so?

There’s no question that commercial and residential real estate makes up a huge part of the U.S. economy. But because so many people are now feeding at the real estate trough, it’s tough to find unbiased comments about the market - especially when almost everyone has a vested interest in a continually rising real estate market.Just about every word on the housing market that is printed or spoken in the media is put through that biased filter. That means even the smallest victory is celebrated when it may not actually be good news for the real estate market.

There are some new wrinkles in the real estate market that make the housing bubble “different this time.” While we (and other countries) have witnessed normal housing boom and bust cycles over the years, there are two huge mitigating factors that accompany this one:
1. Not Learning From 1929: Failing to take a lesson from the 1929 stock market crash, regulators have allowed lenders to extend unprecedented leverage to real estate buyers. We have seen what may be only the tip of the iceberg with the problems in the sub-prime lending market.
2. Public Company Pressure: Because there are a large number of homebuilders listed on the stock market, these companies have keep chalking up consistently good results - both for the good of the market, as well as their shareholders. And when they can’t (like now), their shares get crushed.
In the past two weeks alone, Lennar was the second company to put up earnings that were way down - some 70-80%, and to cap it off, then guide lower for the rest of the year. Result? Lennar dropped from a close of $45.58 last Friday to an intraday low of $42.64 today, before closing at $44.50. via Money Week


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