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.
The tone of this cacophony of housing stories varies widely. Money says that while prices "look nuts . . . the roof isn't going to fall in," and your home "is still a great investment." But the London-based Economist, taking a global view, calls housing "the biggest bubble in history," adding: "Prepare for the economic pain when it pops."
Of course, some have been sounding these warnings for years. "What if Housing Crashed?" Forbes asked in a Sept. 3, 2001, cover story. That same week, Business Week observed: "A housing bubble may be developing -- right behind the Nasdaq bubble." Last September, it was Fortune's turn: "Is the Housing Boom Over?" In April, Business Week said that "2005 looks to be the year that housing finally cools off."
But low mortgage rates have kept things hot. Besides, as Time's cover story noted -- along with five-year jumps in single-family home prices of 135 percent in the Los Angeles area, 117 percent in Las Vegas and 108 percent in Washington -- "who wants to listen to buzz-kill talk? Just as during the 1990s' stock frenzy, the idea that 'everybody's getting rich' echoes in a vast media chamber."
Eventually, the naysayers will be proved right and the rocket ship will run out of fuel. In the meantime, hundreds of thousands of people have made small fortunes by ignoring the media's warnings.
Another Jayson Blair?
The Sacramento Bee seems to have had a serial fabricator on its hands.
An internal investigation into 171 columns by Diana Griego Erwin was unable to verify the existence of 43 people she identified by name in her columns. Erwin resigned in May after she was unable to show that a bartender and others in four recent columns were not figments of her imagination. Executive Editor Rick Rodriguez apologized in a note to readers. "It's something I've been beating myself up over and wondering if we should have caught it earlier," he said in an interview. "The columns have a lot of detail. A reporter is generally going to be trusted by an editor. We're talking about named people where, in many cases, she said she'd been to their home and described their homes in great detail. You don't generally ask 'Did you make this person up?' "
The 12-year staffer denied doing anything wrong but has declined to answer further questions from the paper. Rodriguez says "I still don't have a clue" about Erwin's motivation but she appeared to feel burned out from writing three columns a week.
The Bee reported that many of Erwin's columns were essays "about a singular person who faces a challenge and surmounts it," often reflecting themes, such as wildfires or school shootings, taken from the headlines.
"Some are people with last names so unusual they don't appear anywhere in the United States," the Bee said. "For example, a column that ran May 13, 1997, described Victor Budriyev, a Russian immigrant who lost his sweetheart to the bright lights of Los Angeles. The Bee could find no Victor Budriyev in the United States, nor a single citation for 'Budriyev' in all of the massive Google search engine.
"Some don't show up where they should: Donald Burton, a 'barber' who is not on the state's list of licensed barbers. Margaret Brown, a 'retired teacher' who is not on the rolls of the teachers retirement system. Others are described as longtime homeowners whose names do not appear on property records for their communities."
This was, of course, a failure of Bee editors as well. Rodriguez told his paper that Erwin enjoyed an elevated status at the paper, in part because she was part of a Denver Post team that had won a Pulitzer in 1986. "With a high-profile columnist, especially with the credentials present in this case, it is not first nature or even second nature to ask them if the person they're writing about actually exists," he said.