Media coverage of the housing boom this summer crested in August after dominating the headlines, especially in Big Media. It was placed on the back burner once Hurricane Katrina inflicted its damage, particularly on New Orleans. The scope of the tragedy makes the real estate boom sound fairly petty given amount of human suffering in Louisiana, Mississippi and Alabama. The Federal Government gave the press plenty of subjects to write about as we enter the blame game so popular in Washington.
- Did the housing boom end?
- Have we entered a slow period for real estate news because nothing new is really going on?
- Were readers ready for a break from the real estate housing boom coverage?
The answers are no, kind of and yes.
- The housing boom has continued through the summer as mortgage rates remain low.
- August is often a particularly slow news period yet it seemed that real estate coverage was disproportional to other issues because its become an American obsession (and an easy sell to advertisers).
- Readers were starting to get pretty cynical about the quantity of coverage and jaded about some of the warning signs of overheating.
The hurricane’s affect on the economy will likely segue into exhaustive housing boom coverage. In the near term, the effect of the now limited coverage may benefit the housing market because the intensity of the coverage is less “in your face.” However, in the long term, it probably won’t make any difference at all. There’s a lot of psychology to consider, but at the end of the day, the market is the market.
Tags: Hurricane, Hurricane Katrina, Alan Greenspan
This would be an interesting case study. Absolutely no media coverage on the housing market for 3 months. Without the media frenzy (and stories about 48 hour sleepouts before an open house), what would happen to property values?
Housing News coverage and hype may either spur sales up or down due to the psychological perceptions, but the fact remains that less people can actually afford today’s overinflated housing prices.
Small indicators are still showing up though. In NYC, the average apt price fell 14% compared to 5% during August of last year.
Hurricane Katrina’s effect on building material prices will inflate prices on new housing and when sales inevitably slow builders may see increasing inventories. Hence, downward price pressures across the board.
Creative Financing is rampant. Can’t afford that house? No problem! Later, when interest goes up and prices fall, just walk away from your no equity house.
We are at the tail end of the boom and beginning the downward descent into a major correction. Anyone thinking of buying should wait for the upcoming buyers market. Anyone thinking of selling should do it now and get out before all your sweat equity is lost.
Joe, its interesting that you mention the 14% to 5% drop in August year over year. That was an article covered by the NY Post last week based on a monthly market study published by a local New York brokerage company. I sent the author of the report a note because I had an issue with the methodology. IMHO the report had a series of flaws, the combination of which made it unreliable: it was based on 500 or 600 sales (an estimate, not disclosed – which is another issue); it compared June to August; the trend was based on average sales price, the most volatile of all price indicators. I am not saying this report was technically incorrect, but the statistical validity of it was too weak to be a sensational headline.
Joe, Jonathan It would indicate that the NY Post article was indeed flawed as quite recently a prominant CEO of a major Manhattan brokerage quoted to the media that the beginning of fall is off to a running start, more like a sprint for Manhattan properties. Joe, I think you are incorrect any downward spiral in Manhattan would be a direct result of a recession and oversupply similar to what occurred in the very late 80s early 90s. Interest rates moving higher might slow the market but usually rising rates indicate a robust economy and rising wages more than offset the increased mortgage payments.
In this case rising rates would be indicative not of rising wages but of inflationary pressure caused by energy prices and the disaster related side effects to other parts of the economy. The Fed’s main goal is to keep inflation in check and as such they will continue to rise rates even at the detriment of the economy. They are not in business to keep equity or property values high, but to guard the value of the dolar.