Real Estate Column: Media Overhyping Real Estate "Crisis"
By Danita Kulp

A recent front page news headline read, “Real Housing Crisis: Nobody’s Buying.” Upon reading the hard-to-follow analysis, I realized it actually said San Francisco, Marin, San Mateo and Santa Clara county sales are doing well! Real estate agents document many areas still getting multiple offers, with sales prices at, over or close to list prices.

To me, this is a decent market! Buyers have more choices now and can move at reasonable speeds to secure good quality properties. And sellers make decent gain on their sales, so long as they’ve owned longer than, say, three-to-five years, and put ten-percent-plus down up front.

To top off this good news, interest rates are still phenomenally low, and owners talk of refinancing. In 1981, at 18-percent interest, people still bought and sold. Today’s problem, in my opinion, is inaction rather than market conditions.

Real estate is predictably seasonal. Sales strengthen yearly after people complete their tax returns. Historically, summer sales in San Francisco slow while people vacation. This is not in the news. Instead, out-of-context seasonal data, without benefit of historical overviews, is presented as market crises.

Our market is slower now due mainly to scared first-time buyers, with good (but not accurate) reason. Words like “crisis,” “grim,” “down,” “foreclosure,” “worsen,” “plummet” and “sharp decline” bombard them. Combine this with tightened lending rules, and you have fewer first-time buyers.
Lending rules are forever changing. So nothing’s new, just different.

Who are today’s buyers? A smaller percentage are first-timers. Mainly, they are repeat buyers and investors, with healthy historical perspectives. They know the San Francisco market is internationally desirable and holds its value better than elsewhere. Their advice: “Just jump in!”

There are 58 counties in California; three have the majority of foreclosures. The media points fingers at mortgage brokers for this, making it sound like foreclosures are a market phenomenon. Yet, there are always foreclosures, even in the best markets. When markets slow, oftentimes people CHOOSE to go into foreclosure (and sometimes bankruptcy as well) rather than repair debt, because it is cheaper, faster and easier for them.

How many foreclosures are, in fact, personal choices and not victimization?

In those three counties, foreclosures appear linked to new construction. When large developers create huge housing complexes, they start that process ten-plus years prior. They have no idea what market conditions will exist when their properties are ready to sell. They are heavily indebted, and understandably need to move sales rapidly, so they sometimes make deals with buyers through in-house mortgage brokers, to reduce inventory. If they are national builders, they also may move monies across state lines, making them harder to pursue when problems arise.

The question is what part, if any, did this play in the number of today’s foreclosures? And how does that number compare to foreclosures at each housing downturn during the last 30-40 years?
In the U.S., we’re taught to expect continuous rising profits vs... healthy slowdowns. Instead of planning for those unavoidable slowdowns, consumers oftentimes walk away from debt, causing banks (and sometimes developers) to absorb their financial problems.

The media appears to be reporting news BEFORE it happens. Are there self-fulfilling prophecies at work here driven by fear-based national reporting? Is something actually wrong with today’s real estate market or is this downturn instead driven by media sensationalism to improve ratings? Many in the real estate industry question the latter.

I am from the “Power To The People” generation. If everyone who wanted to buy property today just ignored the media’s Chicken Little reporting, moved forward and took action, the entire nation could more rapidly stabilize.

This is also the idea behind Bush’s tax rebate. The goal is to stimulate spending. Not over-spending. Spending. A large portion of our economy’s present problem might just be inaction.

Danita Kulp is a broker associate with Paragon Real Estate Group. She has sold property since 1981 and wrote monthly real estate articles, geared towards consumer education, from 1994 through 2007 for various SF neighborhoods newspapers. She can be reached at
(415) 738-7081. Or visit paragon-re.com.

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