Bubble Stories

Yesterday the National Association of Realtors released a report stating, “Existing-home sales surpassed market expectations and reached another record in June, as low mortgage interest rates and favorable market conditions continued to attract buyers.” The report went on to note that the median price of homes nationally rose 14.7 percent over the past 12 months.

Sniff, sniff, what’s that cooking in the kitchen? Yet another “Housing market soars, bubble looms” story? Nope, even lazy reporters realize that this storyline has been run through the news cycle more times than the “Hillary Clinton is positioning herself as a moderate” trope.

Reporters (and economists, to be fair) have been predicting a burst bubble monthly for more than two years now, and for more than two years they’ve been wrong.

So what is a reporter to do? Going meta seems to be the move of the day.

This morning CNN anchor Carol Costello and business correspondent Andy Serwer showed how it’s done:

Carol Costello: Let’s talk a little business now. Maybe it’s not too late to get into real estate. I think everyone is in real estate now. We hear it over and over again. The housing market is hot … but we’re also hearing the bubble is going to burst.

Andy Serwer: We keep hearing this experts saying the housing market is going to cool. But, so far, the experts are wrong.

Those silly experts! Who is saying the bubble is about to burst?

Umm, how about Serwer himself, only minutes later?

Serwer: The median home price, $219,000, another new record. We haven’t seen that jump since 1980. Can you say unsustainable? [Emphasis ours.]

Then you’ve got the column by Mark Hulbert of Marketwatch.com that, almost defensively, declares, “This is not yet another column about whether the real estate market in this country is forming a bubble. There have already been entirely too many of those, on both sides of this question.”

The column, instead, it turns out, will be about disputing, “one of the more-frequently used arguments for why we are not in a housing bubble.” The argument to be disputed: since everyone says we are in a bubble, then we must not be in one. You’re warned that you’re “skating on very thin ice indeed if you believe that you are protected from a housing bubble just because so many people are worried about one.”

(Yes, you read that right — a pro-bubble column disguised as a commentary about pro-bubble stories.)

Too few reporters, meantime, note that the bubble storyline has been suspect from the start, in that no matter what the national numbers show, it’s hard to cram the housing market of every U.S. city into one housing bubble.

It may be good publicity for the National Association of Realtors, but covering real estate price movements with national averages is about as useful as waking up in the morning and checking the news for a national temperature.

Housing markets are, in large part, driven by local conditions. If you live in a hot job market, for example, where more people want to live than there is housing available, prices are going to rise. By contrast, if you live in an area of declining population, then there’s a lot of unoccupied housing sitting around — and prices are stuck in amber. Thus, as one zones in on different locations, the story starts to change.

“Tucson’s white-hot housing market continued burning brightly as records for June were established in virtually every statistical category,” reports the Tuscon Citizen.

But wait — CJR Daily remembers the horror stories from Denver chronicled by the New York Times just last week.

Conditions are “rebounding” in Massachusetts, says the Boston Herald, but that’s no relief for the folks in Western Pennsylvania as the Pittsburgh Post-Gazette reports, “home sales for June were down from a year ago, posting a 3.3 percent decline. And while local prices have risen, the increase has not been nearly as dramatic as the national increase.”

So it’s entirely possible that your house is floating on a bubble, while mine is not.

Or, heaven forefend, vice versa.

Thomas Lang

Has America ever needed a media watchdog more than now? Help us by joining CJR today.

Thomas Lang was a writer at CJR Daily.