Bubble talk: cause or symptom of a declining market?
Since last fall there's been a sharp increase in media speculation about whether the "real estate bubble" has burst. Since the fall of 2005 was also about when the housing market slowed in many but not all markets, some in the real estate industry are blaming the media for the slowdown.
They're partly right—the timing is no coincidence—but I think the industry is giving the mainstream media way too much credit. The media is a follower, not a leader.
I say this with confidence because, for once, the media is covering something I know. The explosion of real estate reporting since 2003 has given me an insider's look at how the media covers the latest fad.
Turns out it's like making sausage: you really don't want to know how it's done.
Not that I expect the media to be cheerleaders for the real estate market. I have a Watergate-bred respect for the impartial journalist dedicated to reporting the truth.
But your average journalist is no Bob Woodward. Your average journalist is darn average, sometimes shading to mediocre. Yesterday he covered a local pumpkin festival. Today he's covering local real estate. He knows and cares little about either, but he's been taught how to write as if he did.
His newspaper has long experience in covering the latest fad, long enough to know that you don't hire a specialist—in this case, a bona fide real estate writer—to cover it. Why make a financial commitment to a story that'll probably blow over in a year or two?
His newspaper also knows that you don't build circulation by leading, because your audience won't follow. The road to financial ruin is littered with people and institutions ahead of their time. Better to guess where your market is going and get there with them. Don't lead; dog their steps.
There's another, equally cynical quality to the media's coverage: real estate got too big for its own good, and da boys don't like dat. The next time I hear a celebrity whine that the media is out to get him, I just might believe him.
But the bubble talk in the mainstream media since Fall 2005 is nothing more than the bubble talk that's been showing up in the real estate blogs, those informal and very public focus groups, since 2003. And if "bubble" is now Topic A on the blogs, it's Topic A around the office water cooler and at the backyard barbeques. Same people, same talk, but now the whole world can listen in.
More and more, bursting bubble is what Main Street talks about. And when Main Street hits the brakes, any market stops.