Real estate hurt by media spin

By Bernice Ross, CEO
www.Realestatecoach.com

Here's a typical example from USA Today, Oct. 26, 2007, page 1B:

"New Home Sales Unexpectedly Rise New homes sales posted an unexpected increase in September. But analysts were highly skeptical given the credit crunch and predicted further sales declines. The Commerce Department said sales of new homes rose 4.8 percent last month..."

By the way, here's what they didn't report. Sales in the West were up 36.6 percent. The media totally discounted these statistics. What about a different headline: "Great News! Real Estate Sales Surge Despite Biggest Credit Crunch in Decades"?

Here's another example. In Sept. 6, 2007, article entitled, "New Mortgage Foreclosures Set Record," Martin Crutsinger provided the following summary of a speech given by Doug Duncan, the chief economist for the National Mortgage Bankers Association. Here's how it was reported:

"The number of homeowners receiving foreclosure notices hit a record high in the spring, driven up by problems with subprime mortgages. The Mortgage Bankers Association reported Thursday that mortgage-holders starting the foreclosure process in the April-June quarter reached 0.65 percent, marking the third consecutive quarter that this figure has set an all-time high."

"The delinquency rate has risen to 5.12 percent...The worsening performance was driven by two factors -- heavy losses in the Midwest states of Ohio, Michigan and Indiana, and the collapse of previously booming housing markets in California, Florida, Nevada and Arizona...Analysts said the problems in the formerly red-hot housing markets of California, Florida, Nevada and Arizona reflected in part speculators walking away from mortgages they can no longer afford."

This article ends with the negative media's favorite theme for scaring their readers and/or listeners: "Two million people will face foreclosure in the next two years."

Here are the numbers that the negative media did NOT report from Duncan's speech:

1. Thirty-five percent of the homes in the U.S. do NOT have a mortgage.
2. Some 94.88 percent of the loans ARE performing.
3. The foreclosure problem in this country is really a story about seven states.
4. The biggest foreclosure problems are in Michigan, Ohio and Indiana. These are manufacturing states that had horrible job losses. Since 2001, Michigan has lost 300,000 jobs. These states would probably have had problems no matter what the market was doing.
5. The other four states -- California, Florida, Nevada and Arizona -- experienced significant overbuilding. Twentyfive percent of the foreclosures in these states are on properties that are held by investors who were speculating.
6. Only 25 percent of all mortgages are subprime, and of these, 75 percent are performing.
7. In the other 43 states, foreclosures have fallen in 2007 from 2006 (data from Michael Clawson, vice president, Central Texas Mortgage).

Furthermore, buyers who are waiting to purchase when the so-called bubble pops in California's major metropolitan areas are going to be sitting on the sidelines, according to the latest data from a state REALTOR® group.

According to Leslie Appleton Young, chief economist for the California Association of REALTORS®, the areas being hardest hit in California are the outlying areas where there has been overbuilding. The resale market in California's major markets continues to be strong. In fact, the closer you are to a metropolitan area, the better the sales are. In the million-dollar-plus price range, there has been essentially no change from 2006 to 2007.

There's no question about the fact that there is bad news in some markets. What irks me is that there is also a lot of good news that is either being buried or is not being reported at all.

The question is, "What can REALTORS® and those of us who blog or write for the industry do to combat this trend?" The answer is "plenty."

How to Win the War against the Negative Real Estate Media
Are we going to let the negativity in the media continue to create irrational fears in our clients? Or are we going to fight back and tell the truth about all the good things that are happening in today's real estate market?

There are over one million REALTORS® in the U.S. and approximately two million people who hold licenses. What can we do to counteract the flood of negative press? Here's how we can put a stake in the heart of the negative media.

1. Stage a frontal attack
Whenever you read or hear a piece of news that uses a percentage, remember there are two ways to view that percentage. Take these two examples:

Negative Media: Twenty five percent of the sub prime mortgages in the U.S. are not performing. 
Positive REALTOR® Response: Sub prime mortgages represent 25 percent of all mortgages in the U.S. Of these, 75 percent are performing. This means that only 6.25 percent of the total loans are NOT performing (25 percent of total loans that are sub prime) X (25 percent not performing) = 6.25 percent.

Negative Media: "Prices are down in 15 states."
Positive REALTOR® Response: Prices are stable or increasing in 35\ states."

I find examples like these daily. Take the negative example and make it positive. To do this with percentages, simply subtract the negative percentage from 100 percent. Using the example above, if prices are down in 15 states, the percentage of states with a decrease is 30 percent. To find the percentage where property values are flat or unchanging, subtract 100 percent minus 30 percent. In the example above, prices are stable or are increasing in 70 percent of the states.

Once you calculate this number, share it in your blog, in your marketing materials, and talk about it at every possible opportunity. Not only will you help stem the tide of negative news. You will also attract more clients.

2. Go Long Term, Not Short Term
There's no doubt that many areas are experiencing a slowing market.We have been doing business in a paradise of exceptionally low interest rates, easy lending, amazingly high demand, and a flood of money created by the strong economy and lower tax rates. These factors lead to unprecedented numbers of sales as well as extraordinary appreciation in some areas.

For example, my father died in 1998. His house in Los Angeles was worth $168,000. According to the comparable sales data, it was worth $600,000 at the beginning of 2007. Based upon current sales data, it's currently worth about $575,000. Thus, the value is down $25,000 from January 1, 2007. Here's how the negative media would spin this vs. the more accurate long term assessment of the situation.

Negative Media: Owners Face Massive Losses as Values Plungeby over 4 percent in just 10 months."
Positive REALTOR® Response: "Property Values Soar 300 Percent over the Last Nine Years."

With the exception of a few states that have experienced massive job loss in the manufacturing sector, most areas have seen a substantial increase in property values. All markets go up and down. The larger and quicker the run up, the more likely it is that there will be a downturn. Nevertheless, real estate continues to be a fabulous investment, especially when it comes to the difference between owning and renting. At the NAR Mid year meeting in 2007, Laurence Yun, the Chief Economist for NAR, shared the following data from the Federal Reserve: "The median wealth accumulation for renters from 1995 to 2004 was $4,000. The median wealth accumulation of a homeowner was $184,000."

3. Record years are always followed by declines
One of the negative media's favorite ways to tell us negative things about the real estate market is to quote how much sales are down from 2004, 2005, and 2006.We had the lowest interest rates in over 30 years, which in turn, triggered massive numbers of sales and price appreciation. For example, the $400,000 mortgage on my house in 1986 had payments of $4220 per month. That same $4220 buys a $670,000 mortgage at 6.5 percent. When I started in the business in 1978, interest rates were 9.75 percent for fixed rates. Theyclimbed to 13 percent in late 1979. No one ever envisioned the low rates we have today.

The negative media hammer the fact that the volume of sales is down. In most markets, if you compare the volume of sales today with what it was five or ten years ago, the sales numbers look quite good. In fact, with the Federal Reserve cutting their rate to 4.5 percent, we can look for an improvement in sales, provided we get the word out to our clients.

Negative Media: "Real Estate Sales Slip 20 Percent from 2006."
Positive REALTOR® Response: "2007 Real Estate Sales: Fourth Best Performance since 1997."

We can win the war against the negative media by sharing how much prices have increased over the last ten years and that the demand for FHA loans is up substantially. Let everyone you talk with know that places all over the country are reporting declines in listing inventories. In fact, some are still reporting multiple offers.

We need to ban together to get the positive news out there. Write letters to the editor, post the news on your blog, use it in your marketing materials, and talk about the good news to everyone you know.

REALTORS® are a positive force for good in this country - let's harness our energies to jointly respond to the attacks on our industry and to renew the hope and optimism of the homeowners in this country.

This feature includes both parts of an article Real Estate Hurt by Media Spin written by Bernice Ross, national speaker and CEO of Realestatecoach.com. Ms. Ross is the author of Waging War on Real Estate's Discounters and Who's the Best Person to Sell My House? Both are available online. She can be reached at bernice@realestatecoach.com or visit her blog at www.LuxuryClues.com.