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Home Publications Blogs Beat the Press The Housing Bubble Is Deflating! Big News in the NYT

The Housing Bubble Is Deflating! Big News in the NYT

Monday, 23 May 2011 04:23

The NYT noticed that banks have lots of foreclosed properties and that this is depressing house prices. It warns readers that house prices could fall by 5 percent by the end of 2011.

This piece is bizarrely uninformed about the housing market. First, the decline in house prices is not new. Prices have been falling at the rate of at least 1.0 percent a month since the first time buyers tax credit ended last fall. With prices having already dropped by 2 percent through February, we would have to see a sharp slowing in the rate of price decline for the year-end drop to be just 5 percent.

More importantly, this decline is actually entirely consistent with house prices moving back toward their long-term trend in which they have just tracked the overall rate of inflation. If house prices drop by 12 percent over the course of 2011 they will be just back on this trend.

It would have been useful to readers if this article contained the insights of someone who was more familiar with trends in the housing market.

Comments (3)Add Comment
written by Moopheus, May 23, 2011 8:22
"The NYT . . . is bizarrely uninformed about the housing market."

You pretty much could have stopped right there. That basically sums it up. Or to be even less charitable, the Times, along with most metropolitan newspapers, actively shilled for the real estate industry during the bubble, pleaded for intervention to prop up prices during the bursting of the bubble, and have been trying to push the "good time to buy" line ever since. Perhaps we should take it as a good sign though: when reality starts to intrude in real estate reporting, perhaps we are getting near the bottom.
Ad Revenue
written by Jeff Z, May 23, 2011 8:56
Think about the ad revenue that major metro newspapers get from the real estate industry and the secondary industries that are related. Look at any metro Sunday paper. Each one has a separate real estate section. Plus, think of all the ads from Home Depot, and Lowe's, not to mention home furnishings, garden centers, and even retail from places like Target, Wal-Mart, Sears, JC Penney etc.

Consider also the pressure due to the hierarchical nature of the news business. Editors get pressure from the publisher, and this is fed down through beat reporters. It's not a deliberate conspiracy. It has a lot to do with the way the BUSINESS is structured.
Newspapers and their readers
written by JM, May 23, 2011 12:40
Jeff Z. is correct and on-point. I would add that the readership of most newspapers is also engaged in self-interested delusion. They don't understand that house prices went up far in excess of the true market value, and are now reverting to trend. No one in the MSM wants to break the news to them.

It is truly mind-boggling to me. The Case-Shiller house price data going back to 1895 has been widely available for several years now, but the understanding that prices revert to the mean is very hard to find anywhere. Keep at it Dean - the truth about supply and demand might even make it to the newspapers some day.

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About Beat the Press

Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.