Beginner's Real Estate
Investing Guide: Real Estate Market and Media
By Jeanette Joy Fisher
We've all been bombarded recently
by reports in the various media about how the real
estate boom of the past few years is over. Whether you
read it in the newspaper or a magazine or see it on
television, it seems as if the media has decided the
real estate bubble has burst and the housing market is
in the initial stages of a major swoon. Not so fast, say
a number of leading economists who are challenging the
negative view being portrayed in the media.
Is the Real Estate Market
Crashing? Statistics Challenge
Negative Media Coverage
If you look at the numbers, they
seem to back the opinion of the economists. For
instance, the median home price across the country has
dropped only 1.7 percent in 2006. That statistic
certainly doesn't signify a bust in the real estate
market. They way property values have been increasing
over the past decade, that figure is more of a bump in
the road than a major disaster. Most homeowners are
still far ahead, even with the slight decline in home
prices they experienced this year.
According to most economists,
America's housing market is simply undergoing a badly
needed price correction after five years of after five
years of record-breaking sales and double-digit
appreciation. It's really more of a confirmation of the
soundness of our supply and demand economy than the
catastrophe being reported by the media.
Federal Reserve Opinion Ignored
by Media
Even the Federal Reserve's vice
chairman, Donald L. Kohn, recently told a group of New
York analysts that the Fed expects the recent housing
correction to be much less dramatic than the media would
have us believe, and that the correction will be
relatively short-lived. Interestingly, Kohn's speech
received hardly any mainstream media coverage. Kohn told
his audience that the current downturn may actually be
good for the economy as a whole, because it represents a
chance for America's supply and demand system to
rebalance in areas that have seen dramatic increases
over the past few years, allowing buyers who may have
been priced out of their desired neighborhoods to begin
looking for homes again.
Realtors and Mortgage Rates
There are other factors that may
also spur a fairly quick market recovery, including the
number of new households being formed and an increasing
population. Kohn believes that the inevitable turnaround
should begin relatively soon. Statistics from the
National Association of Realtors (NAR) also would seem
to back up Kohn's optimism. Kohn's same optimism is also
supported by the fact that long-term mortgage rates are
only about a percentage point above historic lows.
Economy and Employment
The recent decline in both gas
prices and the country's unemployment rate both indicate
that Americans are better positioned to make their house
payments. To further debunk the doom-and-gloom
predictions of a housing swoon, the Fed has stopped
raising interest rates, as well, which indicates that
they are comfortable with the situation.
So the next time you turn on your
television and hear about the catastrophic condition of
America's housing market, remember that you can't
believe everything you hear. The actual figures simply
don't support what the media is reporting.
