Housing Market: Not So Bad After All

The Housing Market Has Quietly Healed Itself Across the Nation

Hope, Optimism, and Tips for Surviving the “Bad News'

The U.S. economy…

Seems pretty bleak. A pall has been cast.

The foreclosure business is booming.
Nation's banks are tanking.
Unemployment has not been this bad since The Great Depression.

These are fast becoming the universal “truths' of our day.

Peel back the front page of your evening newspaper or scroll below the fold of your computer screen and you could discover a few tiny headlines that offer a ray of light, albeit a bit sickly and fluorescent. And guess what? Most of them have to do with the housing market.

Home foreclosures are still high, but particularly snarly in Nevada, California, Arizona and Florida. These states have the inauspicious honors of making it to the list of Top Foreclosure Markets:

Nevada: Las Vegas outstrips all other cities with 1 in 60 homes in some stage of foreclosure; statewide the statistics are 1 in 70 homes.
California: half a dozen of California's cities are in major foreclosure trouble.
Arizona: 1 in every 147 homes is in foreclosure.
Florida: Cape Coral-Fort Myers is one of the hardest hit with 1 in 65 homes in foreclosure. The state overall is 1 foreclosure for every 188 households. (1, 2)

For Californians, though, it's far worse than foreclosures. If it were its own nation, California—iconic symbol of American individualism and laid-back cool --would be sinking rapidly without any signs of a lifeboat, folks. Here is also Top Unemployment, HUGE state budget deficit ($8 billion, which will be $12 bill by next year) (3), DMV offices closed on the weekends, school budgets slashed, state-run public parks closed. Are the news headlines and images out of these financially ravaged hotspots becoming a larger perception of reality?

About All Those Foreclosures…

Here's the hopeful light on foreclosures: they're not that bad.

New research out of the University of Virginia (UVA) indicates that our perception of national foreclosure has been horribly skewed, to mythic proportions. Possibly 87% of the foreclosures rolled into the Tootsie Roll lollipop of national coverage may be contained in smallish clusters within the worst foreclosure states: California, Nevada, Arizona, and Florida. And within those states are even more distilled clusters. What does this mean? All is not lost even in the “hardest hit' states, despite the heralds' viral message. (4)

This is not to say that millions of Americans have not already lost their homes to foreclosures or that millions more could without the new federal interventions, but the numbers are not consistent across the board. In some areas real estate professionals are managing quite well to put consumers into bargain priced homes they never would have been able to afford and we can't even celebrate with them.

The Marketing of Viral News and Casual Statistics

How exactly do we overlook so terribly the positive spins, the revised look at the numbers, the “it's not so bad' stories?

Good news CAN travel fast, but bad news is like bad advertising or even a bad smell—many more people will hear about it and pass it along: Digg it, Sphinn it, Furl it, Reddit it, Tweet it, and sniff it.

In fact whole sciences are devoted to deciphering how we share information, respond to good and bad news (5), model information and language for our own successes, and otherwise perceive the golden yarns of our stories. Elementary examples of such communication code snippets include our perceptions of optical illusions—you see one thing and I see another in the same picture. Language modeling, we've learned, can motivate us positively or negatively. And news by its very nature – bad OR good – can move us to divine totally irrational responses. (6)

The flip side to this problem is the casual sharing of statistics, the gritty factoids we supposedly use to academically back up our universal truths. These get passed along from source to source with nary a concern about validity, their original source, original application, involved stakeholders, and without a more critical examination of their parts in every instance. These sometimes erroneous or mis-applied facts evolve into “mutant' facts (7), and they are oftentimes virally shared and referenced.

So how much of our news is marketing? Consider how many print newspapers have been snuffed out in the recent past—11 daily newspapers since March 2007 (8)-- and how many more are “endangered.' (9) The shift to an online market means more access, more traffic and potentially more “circulation,' but it also means stiffer competition for reader's attention. Already the Newspaper Association of America reports that online newspapers added 7.9 million unique visitors to their readership in January 2009. (10)

Glass Half Empty

The news industry has often been rebuked for its failure to give equal air-time to good news, while it's hawking bad. Which begs the question:

How crucial are hope and optimism to the future of our economy?

Two contradictory stories stand out right now:

On March 8 John McCain and a number of other leading Republican decision makers said that they supported actions that would let the big banks of the nation fail if the institutions are unable to support themselves – after already being given billions of dollars to prop themselves upright.

So, the big banks are going down the tubes—that's the message on the Sunday night news streaming in prime time from major media outlets.

But on March 11, just 2 days later (!) we hear Bank of America is “soaring' (11) and on the 12th that Citibank has turned a profit for the last two months and “doesn't need more government capital.' (12)

Which is it? Are the Big Banks dead or alive? In intensive care, but breathing… clearly isn't an option in the news industry. What if there were a middle ground just too boring to write about? “Banks are lukewarm today, they may be okay, but it's a waiting game…..' For news to sell it has to be REALLY good or clearly bad. So-so gets buried. Even if “so-so,' “maudlin,' or “just okay,' are also hopeful and way better than we first thought.

Hope: Return of The Buyers' Market

Almost every market has its outliers, those cats going against the grain. Online, some businesses are making bigger bank than ever:

Niche Businesses Thrive in Bad Economy – from KITV in Honolulu Hawaii
Some businesses thrive amid poor economy – from the Traverse City Record-Eagle in Michigan
Despite Poor Economy Self-Starters Thrive – from NPR

And in real estate there are more than a few folks whose time has come, Karma's smiling on them and most have never owned a home before. Yes, housing prices in most places are still dismal compared to the euphoria of 2006, but you could highlight in neon yellow a handful of metro areas within the hardest hit states, where roost the real foreclosure bulls-eyes.

Again, push aside for a moment the bleak economic leading headlines, peel back the front page of the evening paper, and a more positive economic story dances around in the footlights, -- housing prices “hold steady,' “time to dive into housing market,' (13). Odd words like “hope' and “optimism' pepper the real estate stories.

In Florida where foreclosures shattered the market last year, January figures showed them in a 20% decline (14) and in the Gulf Coast area home sales are up by an optimistic 43%, money AND mental shift. (15)
In North Carolina, the change in home foreclosures from March 2008 is a 50% decline, giving the market time to catch it's breath. (16)
Nationally the news on home values also is not so bad—concentrated in some areas and “barely changed' in others. (17)

These colorful spatters against an otherwise vast concrete wall tell a more vital story.

Some of those stories are streaming directly from the real estate industry sector and rightfully so. Here is a group of professionals battered still by leftover “bubble' rants (not the least of which is Alan Greenspan who recently wanted to reinforce where the real blame for the current economic sinkhole must be placed) (18). They actually are on the front line of the housing scene, can pinpoint where the disasters have occurred, addresses on a neighborhood block, and where there is hope and homes for the taking.

The universally promulgated foreclosure statistic: one in 8 homes faces foreclosure can be debunked if you learn to look at real estate as “a local phenomenon.' (19)

The Biggest Good News Real Estate Has Had

Some of the biggest GOOD NEWS was the announcement of President Obama's American Affordability and Reinvestment Act. This Lone Ranger legislation was to many Americans the biggest optimistic news to hit the front pages in a long time. There is immediate aid for the unemployed, immediate money flooding public education, it's an instant payday for a lot of beleaguered agencies and Americans about to enter crisis-mode. Part of the AARA is a homeowner bailout—the Homeowner Affordability and Stability Plan -- designed as lifeboat for possibly 5 million Americans near the brink of home foreclosure.

The Homeowner Affordability and Stability Plan takes two aggressive stances:

1. Immediate financial assistance to homeowners handcuffed to high mortgages, or caught in an ARM trap. Nearly 5 million homeowners' mortgage situations makes them ineligible to refinance according to current industry rules.(20)

2. Stabilize local housing markets by heading off at the pass possibly thousands more home foreclosures, potential catalysts for market devaluation.

Shift outside the foreclosure mud puddle for a second: the AARA also includes a First Time Homebuyers Tax Credit of $8,000. A handful of states are bootstrapping the credit—instead of credit given at tax time, it's being improvised: credit up front and useable as the down payment at closing. (21) This combination of money and ingenuity could be the rocket fuel the economy needs right now.

Of course plenty of newsmakers must spin Obama's rescue plan into a bad thing. “Too much at once,' reports the New York Times (22), “Republicans try to blame recession on Obama while branding him a socialist,' reports the Canadian Press, and “Risks Lurk in Obama's Poll Ratings,' from the Wall Street Journal.