This morning, the S&P/Case-Schiller national home price index was released for the first quarter of 2008 and indicated that pricing for “American” housing had declined by 14.1% (year-over-year) in that time.
The bigger problem is that the media is reporting this to you as news, when there are three well-known facts that expose this “news” to be nothing more than a PR stunt (and a dishonest one at that):
- We’ve all KNOWN that the housing market was taking a serious beating this year. No news there.
- The S&P/Case-Schiller index includes data from ONLY 20 big cities throughout the USA. The probability that your local area is reflected is quite close to zero.
- Housing starts for last month actually increased, quite probably reflecting a positive expectation on the part of home builders
I’m not saying that the housing market is healthy again. Not at all. But I am saying that you need to take it with a grain of salt and understand this:
Every time you see the S&P/Case-Schiller index referenced, you must understand that this index is the basis for a futures market which S&P (Standard & Poors – financial ratings company) and Case & Schiller (two professors who created a real estate value index) very desperately hope will become a major financial market. And so their press releases are designed primarily to drum up name recognition and curiosity about them, even when the news contained in those press releases are quite old.
In my area, the real estate market has been largely flat during the past few years. What is the real estate market like in your area? Let us know in the comments area below:
Not sure if press should be drawn & quartered or applauded for the psycological oppportunities afforded us investors. Just like the stock market, housing is emotionally driven.
Really good point. The negative coverage certainly can bring opportunities to the astute investor. – Bryan Ellis
The Augusta, Georgia market average home price was actually up about 5% year-to-year. Our local media outlets don’t really cover the purely local angle as much as I would prefer, and it seems the Associated Press and Reuters revel in pushing any negative economic news they can dig up—but only when a Republican is in the White House.
As we’ve all heard time after time, real estae is a local phenomenon. What’s happeing in San Francisco doesn’t amount to a hill of beans in my home town.
In theory, I agree with you. Problem is that people who are considering buying a property in Augusta, Georgia may be exposed to the negative news about San Francisco, which can result in negative influence on their decision. Who is to say that Augusta wouldn’t have had a 10% improvement with more accurate media representation? But the bigger fact is that your market is positive, and I’m really glad to hear that. There are a lot of strong local markets in the USA and we need to let everybody know about them. – Bryan Ellis
I think that the news is reporting what they are told to as always we are made to believe what we think we know. The market runs in “adjustment cycles” about every 10 years, and this one is fueled by many things that have finally caught up with people. I look at this as a true opportunity for those of us with the right motives and a desire to truly help those families in need of our resources and expertise
Very true that there are some fundamental economic issues at the heart of the real estate market we face right now. I believe the good (?) news is that the two primary issues (currency weakness and the subprime mortgage meltdown) are both the result of bad economic policy which can be changed much more easily than if there was an actual shortage of a valuable raw material or severe political unrest. Things aren’t currently great, but there are reasons to be very positive. – Bryan Ellis