A voice crying in the wilderness.
In "Nattering Nabobs of Negativism" I distinguish between "trade media, its reporting aimed only at experts" and "read only by experts", and the mass media. The trade media delivers "the expert reporting that can come only from journalists well-versed in the field, either through direct experience or by watching it closely over a long period of time". The mass media, on the other hand, delivers "press releases and urban legend (turned) into a salable commodity called 'news'".
Couldn't have put it better myself. And now Ken Harney, long-time nationally-syndicated real estate columnist, backs me up. Not just by what he says, but by being himself.
Ken Harney is no shill for the real estate industry. Unlike most of its critics, Harney knows the industry inside and out, and he doesn't always like what he sees. Harney is a poignant reminder of how different real estate discourse would be these days if it were led by knowledgeable, objective writers who'd earned their "expert" label through diligence and hard work instead of having it foisted on them by their managing editors. For reasons I can't fathom—possibly economic expediency and declining journalistic standards—real estate discourse has been dumbed down by neophyte reporters apparently too poorly paid even to have first-hand experience of buying and selling real estate.
In his "Silver lining shines in the housing market", published locally in the October 14, 2006 San Jose Mercury News and online at mercurynews.com, Harney asks, "Just what kind of housing bust is this anyway? With gloom-and-doom purveyors forecasting imminent crashes in dozens of metropolitan areas, how could such key fundamentals as jobs, interest rates and even pending home sales simultaneously be trending in the opposite direction?"
How about this, Ken? Bad news sells.
Harney identifies four key positives he feels are overlooked in "all the dismal reports" about the national real estate market:
Since Harney is national and all real estate is local, we need to adapt his insights to the Silicon Valley market.
Correction, not bust. Real estate, she goes up, and real estate, she goes down, here, there and everywhere, forever and ever, amen. My parents bought their house in the midst of a market slump in 1968. How did that work out? Not only has their house given them and their family shelter for almost forty years, it's worth almost forty times what they paid for it.
Question: What's the most damaging legacy of the 2001 stock market collapse? Answer: No, not the fortunes lost, because by the mid-1990s most of it was funny money anyway. No, I think the real legacy is a misdirected cynicism which simply replaced the dewy-eyed naiveté of the go-go '90s with the jaded naiveté of the early 21st century: now every market is a snare and delusion to the unwary, every upward market is a hype-driven boom, every downward market trend is a catastrophic bust. And the only good profits are quick profits. It just ain't so, but when you realize that the 1929 crash scared small investors out of the stock market for twenty-five years, you realize the impression a bust makes on impressionable Main Street.
Lower prices. Hasn't happened here, even as sales have declined, because speculation wasn't a factor in our market before it cooled, and panic selling isn't a factor now. [Note: Prices have since begun to decline in low-cost areas where risky financing was common.] However, it's undeniable that prices have stopped going up 10 or 15 percent a year [in all but the most sought-after areas], a huge improvement all by itself if you're a buyer.
Interest rates low and declining. It's true: rates are at their lowest point since January 2006. And as Harney points out, that's unusual. Real estate slumps like the one in the early 1980s are usually caused by high interest rates.
Real income is rising. This one's a mixed bag, and the "good" news part of the mix isn't exactly feel-good good. Nationally, real income was up 4.2 percent from October 2005 to October 2006, according to the federal Bureau of Labor Statistics. But locally, the picture isn't as cheerful. Let's use the BLS's San Jose-Sunnyvale-Santa Clara metropolitan area as a stand-in for Silicon Valley. Total non-farm income in that area went up just 1 percent year-over-year, while the weighted Bay Area Consumer Price Index rose 1.8 percent, so real income actually declined unless you work in what the BLS calls (fanfare please) the "Information" sector, where average income went up a tidy 3.1 percent year-over-year.
What's the "Information" sector? You probably already know because you're in it. If not, think "information age" and "global information economy". Think the usual suspects: software publishing, Internet publishing, telecommunications, Internet service providers and Web search portals, data processing industries and information services industries. In other words, what everyone here calls "tech".
It's the same pattern that's been going on since at least the mid-1990s, according to Joint Venture: Silicon Valley Network, a local group that tracks and analyzes Valley trends. Income is expanding at a higher rate for Silicon Valley's technological elite, whose extra dollars drive up the cost of living (including home prices) for everyone, elite and rank-and-file alike. Result? The rich get richer, the middle class treads water and the poor get poorer.
So yes, real income is rising for Silicon Valley science and math majors and their camp followers, but it's flat or declining for the other 80 percent.
I'll leave you with a few more quotes from Harney and the people he interviews, not just about the state of real estate but about the state of real estate coverage:
Couldn't have put it better myself.