Cover Story: Bubble Bath of Doom!

Watch out! Take cover! Any minute now, this thing is going to pop!

"Will The Housing Bubble Burst?" asks New York's Daily News. "After the Housing Boom," says a Business Week cover story. "Some Economists Warn of Housing Bubble," says The Washington Post. A Time cover story has some experts warning of a bubble inflated by a "psychology of greed." "Are Home Prices Really So Crazy?" Money magazine asks in a 43-page section. The Economist's cover shows a brick, labeled "House Prices," plummeting to earth.

Five years after most of the media cheered on a stock-market mania that blew up with disastrous consequences, journalists seem determined to sound warnings about the overheated real estate market. This time, even as housing prices continue to soar, many are erring on the side of pessimism.

"I do think the press has gone way overboard," says financial commentator James Glassman. "They're scaring people."

CNBC anchor Ron Insana, who has a less rosy view, says he is drawing the same kind of criticism for "spoiling the party" as he did before the Nasdaq nose dive in 2000: "You get hate mail: 'When are you getting off this topic? You want prices to go down?' There are going to be some huge blowups. Someone's going to get killed somewhere. It's totally irresponsible to ignore the speculative behavior that's going on."

Memories of the media's stunning failure in the late '90s bull market, when Newsweek ran a cover titled "Everyone's Getting Rich but Me," are still painfully fresh. Journalists "are a little more wary the second time around," says Stephen Shepard, a longtime Business Week editor who is now dean of City University of New York's new journalism school. "The fact is that the business press and the press in general missed the story about what I call the tech bubble. It's also true that housing prices have escalated at an extraordinary rate and people are very sensitive about a collapse."

Many journalists have firsthand knowledge of the subject. Shepard has seen a big price run-up in his Manhattan co-op and Westchester County weekend home. Insana bought a New Jersey house that he is knocking down to build a new one. Glassman, an American Enterprise Institute fellow, has had a big appreciation on his Connecticut home but rented a place in Washington last year because skyrocketing prices have made rents more attractive.

On the other hand, Eric Schurenberg, Money's managing editor, says he has bought and sold houses in San Francisco and New Jersey in the past couple of years and "managed not to get rich in the process."

Why the 43-page effort? "The conversations that people used to have at parties about their tech stocks and telecom returns have now been replaced by, 'Can you believe what my neighbor got for his three-bedroom?' " Schurenberg says. Besides, he says, "a lot of us feel we didn't do the best possible job during the tech bubble, and we're not going to drink the Kool-Aid this time."

While no one knows whether the housing market merely contains "froth," as Fed Chairman Alan Greenspan says, or is in an out-of-control spiral that will lead to a crash, the story's appeal is unmistakable. Perhaps half of Americans owned stocks when day trading became a national mania, but nearly three-quarters own their homes, and a growing share are buying second homes, flipping properties and taking out home-equity loans.

This is turf that every local paper can claim. "Is Dallas in a housing bubble?" asks the Dallas Morning News. "Florida's Housing Bubble: Is It Ready to Burst?" asks the St. Petersburg Times. The Pittsburgh Post-Gazette sounds a bit wistful in reporting: "Pittsburgh Has No Housing Bubble to Burst."

Journalists stress the difference between the stock market and the housing field, starting with the fact that homes also provide shelter. "There are a zillion housing markets," Shepard says, noting the localized nature of the industry. "You can't panic and sell your home the way you can panic and sell your Cisco stock," says Glassman, since it takes more time and is more expensive to unload a property.