Cold Calls - Things MUST Be Getting Bad Out There

More than two years ago I met some colleagues for lunch at a deli up in North County. I remember that day because, while we were ordering lunch we exchanged business cards. And there, on the counter, was a fishbowl with a note from Prudential saying that we could "win a free lunch" if our business card was selected from the fishbowl in some sort of drawing. Usually I never give out my information in that manner, because I know there's no raffle. Instead, the realtors will simply pull out a handful of business cards, find ones they like, call you and essentially "treat" you and some friends to lunch, during which they'll try to sell you their services.

However, I remember this event so clearly because the colleagues I met threw theirs in and encouraged me to do the same, so I threw mine in to, later lamenting it because I didn't want to get a call from a realtor trying to sell me. (I already get enough telemarketers pestering me throughout the day!) Of course, this event took place a couple years back when we were at the height of the real estate bubble, so, not surprisingly, I never did get a call from this Prudential realtor because business must have been so good he didn't need to stoop to cold calls.

Well, things have changed, because yesterday I got a call from a realtor from Prudential who was excited to inform me that my business card had been drawn from a contest at the same deli I had put my business card in two years ago! (That was, actually, the only time I had visited that deli, seeing as I am rarely north of San Diego.) Yes, things must be so slow now that this poor realtor's best lead is to cold call a guy whose business card was left two years ago. If that doesn't hammer home the current housing bubble state here in San Diego, I don't know what does.

North County Times Article on Housing Bubble Blogs

Over at the North County Times newspaper (a newspaper serving northern San Diego county), journalist Andrew Kleske has a piece deriding the myriad of blogs out there that have been discussing the housing bubble: Housing Bubbles and the Websites that Love Them. Upon hearing about this article at The Housing Bubble Blog, I was expecting a good discussion on blogs, their role in reporting news since big media appears to be dropping the ball, and the different opinions and zeal among bloggers. (After all, for every housing bubble doom and gloom blog, there's a blog by a real estate "investor" who's more than happy to brag about his returns.) Sadly this article was a disappointing op-ed piece that basically attempts to equate the housing bubble blogs with doomsayers that want nothing more than to see you sell your home. Mr. Kleske's final statement reiterates his thesis: "When it comes down to it, folks have to make their own predictions, using sites like www.realtor.com or this paper's own www.ncthomes.com to check prices or inventory or sites such as www.domania.com to see recent comparable sales prices."

Are bubble sites doom and gloom? If you read the comments at various housing bubble blogs some sure do sound a bit over the top in their predictions of the dire consequences, but most, in my opinion, have very interesting, well-researched commentary and insight. Bubbles are not sustainable, and anyone who thinks that those who claim so are being overzealous in their doom and gloom needs to take an Econ101 class. And we are starting to see the slowdown, but even Mr. Kleske isn't worried: "Driving through my neighborhood one might get the notion that some Love Canal-style industrial accident or unearthly science fiction events had occurred in the vicinity due to the volume of "For Sale" signs popping up in the past few weeks. ... But if folks were to pay attention and look more closely, they might notice something else appearing atop all those For Sale signs, such as smaller plaques that read "In Escrow," "Sale Pending" or even "Sold." And all of the selling neighbors I talked to weren't fleeing in fright, they were moving up to a bigger home.No, the homes aren't selling as quickly as they have in the past, but they are selling, which implies that for every seller who believes there is a housing bubble, there are buyers who either disagree or don't care."

I did a bit of research on Andrew Kleske (courtesy of Google). If you read a bit about him, you'll see that he's a long-time journalist and business analyst and "is a lecturer in the University of California, San Diego Department of Communications, teaching basic and Internet journalism." For someone who's supposedly well-versed in "Internet journalism," he sure does not seem to understand the benefits and democratization of information and reporting that blogs afford. (Or maybe he does realize this and is fearful for his own job security?) His article also indicates that he isn't aware of basic blog issues (like how Google AdSense works), nor does it look like he did much research before authoring his article. For example, many of the blogs he references in his article haven't been updated in several months, and he seems to think that http://thehousingbubble.blogspot.com/ and http://thehousingbubble2.blogspot.com/ are two separate sites, when in fact they are both Ben's sites, the http://thehousingbubble2.blogspot.com/ coming about due to technical difficulties with the first one.

Is Big Media Biased or Lazy?

Over the past several years we've heard the same winded comments from big media regarding the housing bubble, namely that real estate prices are headed up, up, up! Even over the past six months, when there's been a clear slowdown in the marketplace, big media still trouts out, looks on camera, says (with a straight face), "Is the Housing Boom about to Bust? Let's ask some real estate agents!"

Yes, it's that silly. Over on Another F@cked Borrower, SoCalMtgGuy shares San Diego 10 PM News's savvy as they brought on some experts who claimed NOW WAS THE TIME TO BUY. And earlier, in this blog, I talked about a These Days radio show on KPBS that was rather disappointing, as the two guests were both real estate-related professionals and made the standard Oohs and Ahhs about the industry such salesmen tend to make about their field.

There are news sources that are more level headed and don't pitch the hype, such as The Economist. Each region, too, seems to have their own more responsible news outlet, one that is less heard, but is intelligent enough to not question salesmen on the strengths or weaknesses of the salesmens' industries. In San Diego, it's The Voice of San Diego, which has an entire section dedicated to the housing mess. The good news is that The Voice provides a more balanced view than any of the traditional news outlets.

All of this begs the question, why are news media outlets so happy to bring on mouthpieces who are more than happy to hype up their market? I can only think of two possible reasons:

1. Laziness - after all, we're usually talking about a 500-word column, or three-minute piece on the news. Why spend the effort doing the research, asking the critical questions, and so on, when it's so much easier to just bring on someone who's more than happy to be there, and let them fill your airtime, or help fill your article with quotes?
2. Bias - with the boom in the housing sector traditional media has fared well with ads from realtors, mortgage brokers, lenders, and builders. Don't bite the hand that feeds you!

Whatever it is, it's disappointing to see or read such news reports and think that there are people out there who haven't done their own research and are believing the comments about the industry by its own insiders. Fortunately less biased news is available, but it requires a bit more of a search.

Blasts from the Past

Back in the .com madness, the talking heads on television were saying that Things Were Different. We had entered a New Economy and the old rules of economics no longer applied. Kind of like what realtors have been spouting over the past several years:

• We're running out of land!
• Home prices always go up!
• A home is the best invest you'll ever make!
• It's different this time, with baby boomers and low interest rates and blah blah blah
  

These types of statements are proclaimed by those profiting from any bubble. I'm certain that in the 1840s there were plenty of sources extolling the endless supply of gold in California, just ripe for the taking!

Things aren't different, of course, they never are. The laws of economics are pretty static, I'm afraid. This isn't the first housing bubble this nation has experienced, and the bursting of our current bubble won't be the first bursting either. In fact, this isn't the first time people have discussed real estate bubbles and bursts on the ol' Internet. Sorry Ben, but while the concept of a blog may be something new, the idea behind sharing this information online is old hat. (That being said, Ben's blog does provide many valuable bits of information and discussions.)

Just take a peak back through the old USENET archives, which you can do through Google Group's Advanced Search. Enter the search terms, like real estate investing, and specify a date range (say, around 1990 when the last real estate bubble graced our markets), and you'll find a slew of interesting posts, concerns, ideas, and articles. Here are a few random tidbits I pulled from a few searches back in the archive:

Housing prices going down in Silicon Valley (October 24, 1990)
Some properties in posh San Francisco neighborhoods have lost at least $100K each in value over the last six months, according to a twice-a-year survey by Coldwell Banker. Depreciation is 15 to 20% since April. ... The Southern California homebuilding unit of CalFed Inc. cut prices on $300,000 to $400,000 homes by 10% to 20% and surveys indicate expensive homes throughout the state are being cut by similar amounts. Fears of large-scale defaults by residential builders and homeowners have dropped the stocks of the biggest banks and thrifts in the state by 40% to 88%. "There's real hysteria here, like I've never seen," says Joseph Jolson, an S&L analyst.

Real Estate News Summary, Part 7 (November 21, 1990)
Builder advertises: $50,000 Price Reduction! Executive homes in San
Jose's Blossom Hill area from only $325,000. ... The soft real estate market spread from luxury and middle-priced properties to include three of the Peninsula's more affordable cities during the past 6 months, according to a new survey by Coldwell Banker Residential Services. Residential real estate in Daly City, San Bruno, and South San Francisco depreciated from 5% to 13.5% since May 1990. ... The University of Michigan reports that formerly strong real estate sites in California, such as Anaheim, Orange County, San Francisco, and Los Angeles now lead the list of the nation's riskiest real estate markets.

Hrm, it all sounds eerily familiar...

The image below shows some of the largest real estate busts in the past, and is taken from the CNN/Money article, Real Estate: When Booms Go Bust.