How formulaic housing coverage fails to serve home buyers and how it can be done better

I am seriously, maybe, a potential home buyer. Totally. If things fall into place. My wife and I are saving the money left after we buy diapers. We occasionally look at houses on Zillow, and she explains the importance of something called a “second bathroom.”

I check out the St. Petersburg Times’ real estate snapshots, which tell me that this house in X neighborhood sold for Y after Z days — which would help me, if I wanted to live in X. (I usually don’t.)

And I pay attention to local and national stories about the housing market – new housing starts, current prices and sales of existing homes, and foreclosure forecasts. (The latest round of stories started Tuesday, spurred by the release of the Standard & Poor’s/Case-Shiller index of home prices.)

These stories seem important; they have big headlines and run prominently in the paper and online. They use the latest figures to raise the all-important question of whether the market has hit bottom, often relying on an expert to size up the data and predict when the market will recover.

The bottom always seems to be six to nine months away.

At some point these forecasts will be correct. But with every blown prediction, these experts have less credibility. And over time, these stories become less useful to their audience: the people who own, and may own, homes.

It’s time for news organizations to consider how they can serve that audience better. A start: Acknowledge what reporters and experts don’t know. Because it’s pretty evident already.

Is it time to buy?

For the past few years, whenever my wife and I discuss home ownership with friends or acquaintances, they tell us, “Well, now’s the time to buy.” And I respond (sometimes then, sometimes later to my wife), “Tell me when it hasn’t been time to buy.”

In the first part of the last decade, as people’s homes turned into magically expanding piggy banks, it was time to buy. And then as prices collapsed it was again a good time to buy.

I know many people who bought homes during the bubble – not because they were speculators, but because it was the right time in their lives. Many of those people are now underwater on their mortgages or lost money when they sold.

I don’t want to find myself in the same situation. Maybe I’m a fool for trying to time the market, but I never want to owe more money on my house than I can sell it for.

So I figured I should educate myself by reading every local and national story I came across. I figured that if I looked at enough snapshots of the market, eventually I’d be able to see the whole picture.

Like many people following news on a particular subject, I come to these stories with a question: Should I buy a house? Now? Ever?

These stories often speak precisely to this question. Some stories address whether this is a “buyer’s market”; others surmise whether this is a “good time to buy.”

Such advice – sometimes implicit, sometimes explicit – factors into people’s decisions, said Dean Baker, co-director of the Center for Economic and Policy Research in Washington, D.C. This happened during the bubble, too. When people read stories about condos selling out before the concrete had been poured, they became willing to pay inflated prices.

According to Gallup, even through this historic drop in home values, a majority of Americans surveyed believe it’s a good time to buy a house. Between 70 and 80 percent of people believed so during the bubble, and though that dropped to 52 percent in 2006, it’s back up to 69 percent.

Dennis Jacobe, the chief economist for Gallup, said this belief stems from two different means of reasoning, each leading to the same conclusion, during good times and bad.

“When the economy was booming and housing prices were going up, it looked like a great time to buy a house,” he said. “But it was an investment, and the faster you got in, the more affordable it was.”

Now, when people hear about foreclosures, short sales and low interest rates, Jacobe said, it contributes to the “deal psychology.” Houses are more affordable.

A recent poll indicates that a minority of Americans believe their homes have lost value in the recession. “What does this mean?” asked Felix Salmon, who blogs for Reuters. “During the boom, Americans were hyper-conscious of how much their homes were worth. During the bust, they’re in denial.”

“The end is near”

Yet the boosterism evident in so many news stories is based on volatile, short-term figures and experts who have proven to be wrong over and over.

The stories are formulaic. Take an increase or decrease in one metric or another, even if the increase is dwarfed by the margin of error. Add an expert who speaks with authority about what this means for the general health of the market, and top off with a real estate agent offering a corroborating anecdote. Maybe, for some spice, throw in a conflicting opinion.

One of the few stories that ran counter to the trend, headlined “Why Home Prices Will Continue To Fall,” noted that “asking a Realtor whether it’s a good time to buy a house is a little like asking a used car salesman whether it’s a good time to buy an automobile.”

So why do it? Why cover these indices so microscopically, why use these sources, if they can’t help people make wise decisions for themselves?

Breaking out of the routine coverage

Perhaps housing price indexes and home sales reports, like unemployment figures, are inherently newsworthy. If so, news organizations should strive to do additional reporting and provide real context, rather than using a single report as a weather vane for a large, shifting market with competing forces and conflicting signals.

The routine approach is to call an economist or real estate agent and ask what the latest figures mean. That’s how we end up with conventional wisdom like “It’s time to buy” and oversimplifications like “Buyers are getting off the fence.”

Consider letting others handle the commodity news while you aim for a more complete, data-driven and less anecdotal picture. Perhaps median home prices appear to be rising because expensive homes are selling, contrary to the overall market.. Maybe prices are dropping because so many of the sales are foreclosures and short sales.

Here’s one way to add meaning: A recent New York Times story reported that one price index may have exaggerated price declines because it includes short sales and foreclosures — homes that probably are in bad shape. On the other hand, a price index based on refinancings most likely was too rosy because the only homes being refinanced are the ones that aren’t underwater — homes that held their value better than the rest of the market.

If identifying the bottom of the market is important – for homeowners or as a general market indicator – perhaps a news app is a better approach. Show all the indicators and let people sort through them. Annotate it with experts’ opinions about why they believe one indicator or another is more insightful. (The Times did a story along these lines a few years ago, but I wish it had an interactive component.)

Be wary of predictions from people who have a vested interest in the market. We have enough of that in campaign coverage, with people spinning poll numbers to portray their candidate in the best light.

Realize that anecdotes don’t mean much when reporting on a single measure of a complex, shifting market. Maybe an agent is doing well because she sells entry-level homes, which are doing better than the overall market. Or perhaps she specializes in a part of town that has been more resilient.

Whether for an incremental story or one with a longer view, identify a target audience and a purpose before you do any reporting: Who is this story aimed at, and what should they do with this information?

People like me are going to use your news stories – all of them, not just the consumer-oriented ones – to make decisions. As we’re pondering home ownership, news outlets should take some ownership of their housing coverage.

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  • http://www.facebook.com/profile.php?id=100000836244633 John Ware

    As someone who has lived (and invested) since the late ’60s when I graduated from high school, I have learned to not trust the media, nor any other “expert,” for that matter. From the, “If Jimmy jumped off a bridge, would you jump too?” school of thought, no one save yourself is going to feed and house your family. My parents learned that during the Depression and I learned it early. For the life of me, why anyone with the width and breadth of information and data available to them today – and at their fingertips, as well – would rely on second-, third-, and fourth-hand knowledge to raise and nurture their family is beyond me.

  • http://www.poynter.org Poynter

    @pguinnessy:disqus, this is another story that wouldn’t be revealed simply by looking at home sales reports and price indexes. But it would help tell the larger story of the market — the people who are stymied because of the tighter lending restrictions.

    Steve Myers

  • http://www.poynter.org Poynter

    @lenejohansen:disqus Good point. Real estate, like politics, is local, right? You can learn a lot about a market by observing it on the street.

    Steve Myers

  • Anonymous

    I think this is a perfect example of where local and hyper-local news are better than national stories based on national averages from large metropolitan areas. We are currently in the same position of maybe considering buying a house because it is a great time to buy a house within a 4*6 block radius to the West of where we currently rent due to current gentrification trends and neighborhood rejuvenation projects. Good local reporting on civic projects and local business development trends are much more valuable than those “it is a buyers market” stories. It is a buyers market just means that the inventory is larger than the demand, which takes little or no reporting skills.

  • Anonymous

    What I think is underreported, is the difficulty in getting refinancing. My own bank won’t refinance even though I have my mortgage with them because the house value is too low compared to the principle (e.g. the loan was below 80% the value of the house three years ago and now , because houses have dropped in value, the loan is 85%, and unless I can come up with another 10 grand, I can’t refinance). This is costing me $700 per month that I could save or spend on repairs to the house. Fix the refinance issue and the economy would get a boost.

  • http://twitter.com/lkorleski LK Richardson

    If people would follow a few simple guidelines (save 10 percent of your money, give 10 percent to church or charity, don’t pay more than 25 percent of your income for rent or mortgage, don’t buy a house that’s more than three times your annual salary) instead of listening to real estate agents and bankers who make a percentage of the sale and giving the culture of greed the fuel it needs, the subprime loan/CDO debacle would never have happened.

  • http://pulse.yahoo.com/_MAJYXDYRXF6WPMUSI7QPLBTJCQ Vernor

    Jesus, learn how to write a lede.