The National Association of Realtors has launched its first ever media blitz to the tune of $40 million to unspin the spin of the past 5 years. When the market was rising, houses seemed to sell themselves and the news was always up, up up, The NAR, until July of this year, kept the mantra going even after the market had cooled at the end of last year.
It severely damaged their credibility as market experts because at some point, the market is the market. Its a shame because they provide a lot of good information. In July, we first started to hear comments in the order of “sellers need to price realistically” because if properties aren’t selling, even though the hype says its a good market, then the membership is not making money.
The assumption by the consumer is now if the market is not going up, then it must be going down.” As a result, the number of sales has fallen sharply this year as the consumer simply waits until the time is right.
The brokerage community largely feels that the media has been responsible for the housing downturn because they have been churning out so many negative stories that buyers have lost the sense of urgency to make a decision and are simply waiting for the market to come down. I have been to a number of Realtor functions where the media is made to be responsible for all negative aspects of the housing market, which is simply ridiculous, but I imagine its a statement of frustration. You tend to remember all the red traffic lights you saw when you are running late to an appointment.
The 1M+ NAR membership beseached the trade group to do something about it the message being delivered to the consumer. They decided to launch an ad campaign [NYT] to send a different message out, to better present NAR’s side of the story:
The National Association of Realtors will begin promoting the notion that buying a home is an unalloyed good in a $40 million campaign that boldly declares: “It’s a great time to buy or sell a home.”
The ad refers to buyers and sellers but in reality, the target market is clearly buyers. There are already plenty of sellers out there as evidenced by rising inventory levels over the past year.
The danger in doing this, is that the consumer could construe this as a sign of desperation [NYDN] and hunker down further. However, I think that the net result will be favorable and its probably something they should have done as the market began to turn last year, not after the fact.
Here’s the ad:
The bullet point message ad is a good approach, although lets look at each point made:
Interest Rates At Record Lows: Well, they are near record lows. Forecasts suggest rates aren’t going to change all that much over the next year so thats a good thing for housing. The only problem is that mortgage rates are flat and may decline because the economy is weakening. No job, no house.
Large Inventory Won’t Last: This is a highly questionable point because it infers that demand is going to increase to erode inventory, yet the whole driver of this ad campaign was lower sales activity.
Prices Overall Have Stabilized: Well, annual appreciation has shown a decline for two months in a row so it is not clear what would change this pattern. Stabilized pricing probably refers to the fact that they are not rising anymore and although they showed a small drop, NAR probably feels that prices will remain stable for the next several months.
Positive Outlook: They cite Former Fed Chair Alan Greenspan as suggesting that most of the negatives to do with housing are behind us. Who cares what the former chairman thinks and didn’t he get us here to this point anyway? The current chairman is not so optimistic.
Real Estate Is A Great Investment: It has been for me, and not just because its one type of financial investment.
Don’t Delay: This is the closing point of the ad and its main goal – create a sense of urgency when none currently exists.
I think if the ads are run frequently enough, it may help stimulate some sales activity and it shows to its membership, that NAR is working for them. However, running an ad is not going to create another housing boom.
UPDATE: Good grief, I went back and re-read this post. Normally I don’t go back and make changes but my grammar and explanations were particularly horrific this morning so I made some changes. Hope I don’t have to go to Iraq now…
Tags: Alan Greenspan, NAR, National Association of Realtors
the desperation of the NAR is obvious. what is funny is that their strategy is backward. the NAR has ZERO credibility among buyers at this point. when have they ever said it’s a bad time to buy? buyers know the market is heading down in a big way and these ads do nothing but confirm it.
what the NAR should be doing is going after sellers to cut prices. Imagine if instead they had taken out a full page ad saying, “The Real Estate Boom Is Over! Now is the time to get realistic with your price!”
Result: instant credibility with buyers; scared sellers; increased transactions (the goal, right?)
I only saw your story after I blogged mine, but I came to the same conclusion — it appears desperate.
The readers of the NYT and WSJ and other publications deserve a little bit more credit than to hear REALTORS tell them it’s a “great time to buy and sell homes”.
It’s not desperation! The NAR knows what’s best for us.
Housing is a new paradigm, and everybody who doesn’t buy, now, will be priced out forever. Anybody who does buy will be rewarded with a lifetime of riches, as their property will resume its 30% yearly price increase.
Renters, and anybody born in a future generation, will not be able to afford a $30,000,000 starter flat in 15 years. They will live in tent cities, and Hondas.
This asset bubble is different than all of the others – it will never slow down, or pop. The gains are permanent.
IT’S A GREAT TIME TO BUY OR SELL A HOME!!!
I want to point out – I’m not a real estate broker or agent, just someone who follows this stuff. That said – how crazy is it to expect a group like NAR to run an ad for sellers to drop their price. How about “The market is tanking – and we at NAR think its not tanking fast enough – so if your a seller – drop your price – race to the bottom – and if your a buyer – just wait, because pretty soon houses will be free” – that would be a great statagy.
Bubble or No Trouble at all? The Experts Decide. By Sally O’Tool
All across America real estate investors are pondering the question: is there a housing bubble? To answer this question we interviewed 4 of the nation’s leading unbiased real estate experts: David Lereah, economist; Leslie Appleton-Young, economist; Gary Watts, a highly respected real estate observer; and a man who goes by the name “Buck” that runs a popular Internet blog called There Is No Housing Bubble!
(Editor’s note: for space reasons I deleted the wonderful, touching, and poetic words of Mr. Lereah, Watts, and Ms. Appleton-Young.)
For a different perspective we contacted the owner of a blog called There Is No Housing Bubble! which has taken the Internet by storm. In its short lifespan it has rocketed up the Alexa charts to become the 12th most visited blog on the Internet. As the website’s title indicates, “Buck” doesn’t believe there is or ever was a housing bubble.
Norbes: First off, tell us a bit about your background. Are you in the real estate profession? For how long? And why the pseudonym? Buck: Yes I am an experienced real estate professional, the kind of person smart customers seek out for my wisdom and depth of market knowledge. I’ve been an agent for almost 2 1/2 years now, all of which has been in the hot Southern California market — the trenches of the future as I like to call it. Like most people in the industry I got my start as an adult film actor, so the transition to real estate was a natural and smooth one. As for the pseudonym, unfortunately there are a lot of angry renters out there. I’ve already had 2 attempts on my life since starting the blog (although one of which might have just been a misunderstanding between me and the drive through cashier). So the less these people know about me the safer I am.
Norbes: You’ve really sacrificed a lot to spread your message of economic opportunity to the masses. What caused you to launch your career as an Internet pundit? Buck: It is hard for me to tell this story without choking up. Please bear with me. It was the winter of 2005, around Christmas time. I was showing a beautiful and striking example of early 20th century architecture in East Los Angeles to a young couple. He was a mortgage broker and she was an appraiser. They had a young 3 year old daughter. They were an ideal couple to move into this gentrifying, up and coming neighborhood. Being the financially savvy people you’d expect, they were concerned whether they could afford this home. Even with an option loan and making the minimum payment they wouldn’t have much left over for other expenses. Buying this house would be a major lifestyle change and they were not sure if they had the courage to make that decision. And then, as often is the case, a young child imparts wisdom to her parents. The little girl said “mommy, I asked Santa to bring me a house for Christmas instead of toys. Do you think Santa can fit a house in his sleigh?” With that the parents looked at each other and told her they were sure Santa could fit a house in his sleigh. They made an offer that afternoon and after the obligatory bidding war they are now starting their new life together in their Christmas present. I remember thinking to myself what good people they were to assure their daughter’s future by buying this home. Later that evening I went online and came across some real estate bubble websites. I was angry. What if this couple had read these lies? Would they have still bought that home? I doubted it for the lies were convincing in a nuanced way. I knew I had to take action, to stop the lies, and stand up for all the children whose future is in peril of these demonic bubble blowers.
Norbes: You seem to have a lot of animosity towards the housing bubble advocates. Why? Buck: Several reasons. One, because they try to use fear to cause people to make an irrational decision when the fact is: if they don’t buy now they’ll be priced out forever. Second, real estate is a proven winner. As all of your experts pointed out, they ain’t making any more land but they sure are making a lot of babies. And using Darwin’s laws of supply and demand, prices of land will always go up. I defy anyone to show me someone who purchased a home in California and over a 30 year time span lost money on the transaction. They can’t because it has never happened. In fact, over any 30 year time span you’ll see the home owner made a small fortune. However these bubble headed liars claim it is different this time. That somehow the future will be different this time. Beware of anyone who claims “it is different this time.” Thirdly, there is a new paradigm in this country. We are moving along well known economic laws, from an industrial economy, to a service economy, to a real estate economy. We are in the beginning stages of this new economy and new times call for new thinking.
Norbes: You are a big proponent of using your home’s equity to leverage the purchase of other homes. Is that risky? Buck: Let me tell you the story of a man named Charles. Charles lived in the early 20th century and devised a new financial strategy. He would use current revenues to pay current obligations and count on the appreciation of revenues to pay future obligations. This scheme was so successful that millions of dollars poured into his investment fund and eventually this technique become so popular that the US government uses it to pay for our nation’s retirement plan (social security). Do you think the US government would use risky accounting methods to assure its citizens of their retirement money? I don’t think so. So what I want to do is show people how they can use this time tested financial technique for their own profit. But first they must change their thinking. They are not buying a home, instead they are gaining control of a revenue stream. That stream of money can be managed to produce more and more wealth. It is the engine of your prosperity and all it needs for you to do is to be brave enough to turn the key. Will you turn your key?
Norbes: How do you respond to critics who say home prices have gotten out of sync with incomes? Buck: With a four letter word. Just kidding. Seriously, these critics are looking at the problem with outdated ideas. It is different this time and requires different thinking. People who own homes have 2 revenue streams to work with. 1) their regular job income. This is a paltry and declining sum in today’s world. 2) their home’s appreciation. In most California markets the home owner is making another $30-100K a year in their home’s appreciation. Once you factor that income stream in today’s homes are extremely affordable. And as prices rise, the appreciation rises in real terms (although in percentage terms it might stay very flat). Therefore homes become MORE affordable as they become more expensive due to this secondary revenue stream. Bubble advocates never factor in this second income into their affordability figures. With that factored in everyone can afford a home, from the CEO all the way down to a farm worker and everyone in between.
Norbes: Do you believe it is a good time to buy? Buck: Now is a great time to buy. In fact, it is the best time to buy. I have over 100 highly coveted properties that I can show this afternoon. I know most real estate agents have similar portfolios too. You can be like a kid in a candy story and cherry pick the finest homes made by the skilled artisans of Mexico that this nation has to offer and get them while they are still at ground floor prices. Believe me when I say you won’t see prices like this in 5 years. You’ll get down on your knees and beg to buy a home at these prices.
And there you have it. Four experts, four opinions, and one consensus — now is a great time to buy a home.
Buy a House, Or The Dog Gets It…
Matrix gives a great run down on NAR’s new advertising campaign.The key issue in the ad is as follows: Don’t Delay: This is the closing point of the ad and its main goal – create a sense of urgency when none currently exists. Personally, the a…
” how crazy is it to expect a group like NAR to run an ad for sellers to drop their price.”
what’s so crazy about it? people aren’t buying because of the ridiculous prices. we’re at full employment with low interest rates and plenty of housing inventory. there is no impediment to sales other than price.
if realtors want to project themselves as “experts,” then they need to be prepared to delivery the bad news as well as the good
I think we’ll see these ads in the business or real estate section next to articles about how auctions are the next big thing in real estate sales for desperate sellers.
If I were the NAR I’d downplay the investment potential and pitch it like Fannie Mae: home ownership as part of the American Dream, as something to pass on to future generations, as a statement to your beer-swillin’ rent-throwin’-away cohorts that you’ve grown up and accepted adult responsibilities. What I would not do is try to directly counter the innumerable articles and ‘think pieces’ that led to this campaign in the first place.
I think there is a great angle for NAR to play by returning to the nesting, sheltering image of home ownership. Give folks a softer sell and don’t refer to the website three lines above the footer. Of course they’d have to ditch the 1961 graphics and actually learn how to properly lay out an ad, but with a 6% commission, I’m sure they can swing it.
agreed with skeptic…The NAR should be truthful with the fundamentals which clearly show asking prices still very high and inventory levels rising.
A clear sign that prices need to come down to move a property. Many brokers are scared out of their wits to even bring up a price cut with their clients for the fear of losing the exclusive listing.
Its ironic, sellers want the best price and the best service yet they look the other way when the real problem is the value of their home on the open market. I’ve seen sellers switch brokerages after numerous price cuts, and then RAISE the price with the new brokerage with the hopes of a fresh start? That makes absolutely no sense!
Check out this hilarious spoof of the ad over at keith’s blog.
First point is that NAR is probably responding to the cries from the membership that “we’re getting the crap beaten out of us by the press and commentators, so please do something”. This ad qualifies as ‘something’.
Second, I agree with Jonathan’s continuous point about the NAR having lost credibility by always finding a sweet spin or the nugget of arguably bullish data in a miasma of bearish news.
Third, NAR is a national organization, so almost anything that it says nationally runs against the all-real-estate-is-local axiom. Except in extreme circumstances, the same message just cannot apply to even most of this large country (late 2005 was a get time to sell, except in Florida, Michigan, somewhere else, somewhere else…).
Having said all this, and as a card carrying member of the NAR, I think BC is right on. NAR can counter the doom-doom-doom press in softer ways without being Pollyanna if they respect local conditions and refer people to their local RealtorsÂ® to see which positive factors for buying or selling in their local markets suggest that this is a good time for them to buy or sell.
The US ain’t one market, and one size does not fit all.
But this may be too complicated a message for NAR’s feel-good campaign.
THX for the Buck-Norbes dialogue. Quite a few grins in there.
Hi. i live in Southern CA (LA County). I keep hearing about the real estate market cooling down. I was expecting to see lower prices, but to no avail. Is it a good time to buy now or should i wait one to two more years?
I asked a banker, real estate broker, loan consultant and other homeowners and they all have differing opinions. Who do I believe?
I am a first-time homebuyer and would like to start investing in some property. I have $30,000 cash, but don’t think this is enough for a 20% downpayment for some condos here in LA. I would love to hear from you.
Thank you in advance for your advice.
[…] to try to convince consumers that “It’s a Great Time to Buy or Sell a Home.”Â The Matrix has a good analysis of this ad and its goal.Â The Real Estate Guide’s post, It’s a […]