“Homeownership declined to all-time lows during housing boom” says the headline on an Associated Press story at the Tribune’s Web site.
The article is a poster child for virtually everything that’s wrong with far too much of the real estate reporting in major media outlets.
Early in the article we find the following, directly contradicting the headline.
“… the U.S. homeownership rate rose steadily in recent decades. It peaked at 69.2 percent in 2004 before backing down to 68.2 percent at the end of the third quarter, according to the Census Bureau, which has collected the data since 1965.”
In other words, homeownership soared to all-time highs during the housing boom and has declined slightly sine 2004.
More idiocy follows throughout the article. This one’s a whopper:
“But that small decline masks a much larger plunge in the amount of equity homeowners hold. This figure, equal to the percentage of a home’s market value minus mortgage-related debt, fell to an average of 51.7 percent at the end of the second quarter, down from 62 percent at the end of 1990, the Federal Reserve reported, even as the average home value surged 139 percent during that period.”
Does the reporter even know what the word “amount” means? Clearly not. The amount of homeowner equity increased by trillions of dollars over the period indicated even though the percentage of homeowners’ aggregate equity declined. Add a trillion here and a trillion there – and it’s a loss according to this reporter.
And some of you wonder why I get testy when you cite the stupid, innumerate conclusions of media articles as proof positive of where the housing market in Chicago is at today!
What passes for modern journalism is quite pathetic, but I didn’t hear realtors complaining when the media was continually hyping real estate. “Buy now or be priced out forever” was the stupidest piece of illogic to ever come out of the housing bubble, but media accuracy doesn’t become a problem until they report that things aren’t going great.
What? The article and headline make sense to me.
Not a surprise to me. Every time I see a home for sale that looks interesting to me, I check it out at the recorder of deeds. Almost every time there’s a home equity loan or three recorded for tens or hundreds of thousands of dollars.
Call me a bitter renter if you want, but these people can’t afford to sell for what I’m willing to pay. I hope the Escalades and fancy vacations were worth it.
Joe, there’s no question that the level of economic and scientific illiteracy in the media today is flat – out abysmal. But you can also lay some of this at the feet of the happy – go – lucky former economist of the NRA, who bloviated so much idiocy during the boom times that the inevitable blow – back was only a matter of time. Nobody likes rampant shills who ignore all evidence to the contrary, and that guy was one of the worst offenders – he kept spouting all sorts of nonsense even after it was clear that the correction was already well underway.
Whoops, I mean NAR – guns are optional.
…but they may come in handy if they’re coming to repossess.
Dmac,
The NAR economist was often wrong. He was never a pure shill.
Have you ever dealt with or known any of these people? I have, and I believe you’re flat out wrong and don’t know what you’re talking about.
Whether you believe it or not – and you clearly don’t – the chief economist of the NAR is generally a solid, widely-respected, highly competent professional
Lots of people were wrong about the direction of housing values and what was going on. There’s no point in calling them names.
Carter,
The sheriffs are likely to outgun you. They show up armed.
The “homeownership” referred to in that highlighted text is the rate of people buying homes and in most cases getting home loans.Just because you close on a house doesn’t mean you actually own it. The bank owns it if you take out a mortgage.
What the headline is referring to regarding a decrease in homeownership is the amount of one’s home equity. Prices have increased but, equity down to under 52% across the nation from 62% in 1990 as the story reported. The reason is people had been tapping their equity when prices were increasing. Lenders offered 100% financing for purchases and some lenders were giving loans at 125% of home value. What is so difficult to believe about this article? Makes perfect sense to me.
Joe and others who have an agenda may try to spin this as a misleading article. It’s not!
That’s not exactly true.
If the bank owned it, they could just show up and take it back, which they obviously cannot.
I understand this is a major difference between now and the days of the Great Depression, back then I’m told banks could actually demand full payment on the spot or they could indeed repossess at will.
Really? So if I don’t make my payment for 90 days they can’t take it back?
If I take a loan on a car do I own it or does the bank own it?
“…chief economist of the NAR is generally a solid, widely-respected, highly competent professional…”
OK, then please explain why he moved into another position earlier this year. Also – please peruse just a few of the entries in this link:
http://davidlereahwatch.blogspot.com/2006_12_01_archive.html
Granted, this guy has a definite axe to grind, so try something a little less strident:
http://www.fool.com/investing/general/2007/04/12/house-price-drop-thats-unpossible.aspx
“Have you ever dealt with or known any of these people?”
Why should that make any difference in my evaluation regarding their public performance? If I follow your reasoning here, I cannot criticize Daley because I don’t know the man personally? I’ve listened to and read the guy’s missives over the years, and his official title often sounded more like a marketing person – not an economist.
This guy was not only wrong most of the time, but wrong egregiously. I’m not an economist, but I don’t believe you need an economic degree to understand rampant boosterism when you hear it. If you feel like I must know the man personally before I submit an opinion on certain aspects of his public performance, then I suggest you’re taking it way too personally.
ts,
It’s pointless to address your bizarre arguments, and no one should try. Anyone who can read English – and isn’t an Associated Press reporter – understands the meaning of the words “homeownership” and “amount.”
It’s clear that you don’t have the minimum level of literacy that’s required to understand this site. I recommend you move on and spend your time at SesameStreet.org. You’ll benefit from that, and so will we.
No, what I’m saying (or more accurately, what my financial adviser told me) is there are legal protections you have which prevent the bank from just showing up at your door and saying “give me the *total* amount you owe, or we take it back.”
Certainly if you don’t pay on the loan there are also legal protections the bank has to get their money back (which usually translates into them taking the house).
It’s a somewhat semantic difference, but it also isn’t – the way I see it is you aren’t borrowing the house from the bank, you are borrowing the money to buy it.
if the bank truly owned the house until the note was paid in full, theoretically you might need their permission to alter it, which is obviously ridiculous, but would be a logical outcome of that argument. they could stop you from doing anything do it that might hurt its value, under the argument it was really their house.
Carter,
The holder of a note secured by a mortgage still has the right to declare the entire principal balance of a loan “immediately due and payable” in the event of a default (e.g., delinquent payments). Read the note you signed on your mortgage loan to confirm this. That hasn’t changed since the Depression.
There are “fast foreclosure” states and “slow foreclosure” states. Illinois is one of the slow foreclosure states.
The “slow foreclosure” states, as a general proposition, are the ones that had a lot of farmers at the time of the Depression. Lenders in the US could never really repossess “at will.” They can take possession pursuant to a foreclosure action pretty quickly in some states, however, unlike Illinois where the process can drag on for oquite a few months.
Easy Joe… How are my arguments bizarre? The article makes perfect sense. If what I am saying is incorrect please enlighten me.
The best you can come up with is that I am illiterate?
You make yourself look bad when you make posts like that.
ts,
Here’s the deal, using the AP numbers.
In 1990 the average loan on $100 of home value was $51.70, leaving the average owner with $48.30 in equity.
In 2004, that $100 home was worth an average of $239, and had an average loan of $148.18 (62%), leaving $90.82 in equity for the average owner.
Tell you what, you give me $90.82 and I’ll give you $48.30 back. By the AP’s logic and yours, you’re ahead of the game. Deal?
That’s as far as I’ll go.
If I look bad for calling out completely illiterate arguments, I’m totally OK with that. It’s absurd to have to listen to someone calling simple math a “spin.”
Dmac,
Reread what you originally said about David Lereah.
You weren’t simply criticizing his performance, you were calling him all sorts of names in a gross personal attack, suggesting that he was a “happy-go-lucky … shill.”
You’re right that you don’t need to know David Lereah to criticize his projections. What I was suggesting is that if you ever had any real contact with the David Lereahs of the world you would bite your tongue and not call them shills.
Back in the late 70s I monitored a perfect barometer of interest rate trends. They ALWAYS moved in the opposite direction of where the chief economist of First Chicago said they were headed. Always. Following his predictions cost First Chicago, the city’s largest bank at the time, hundreds of millions of dollars in losses.
He was far more wrong far more often than you contend David Lereah was. Did that make him a happy-go-lucky shill? In your book, apparently. Or does a different standard apply to people in the real estate industry?
Wow, that was a “gross personal attack?” OK, I’ll take back my personal observations, and just judge him on his performance at the NAR – fair enough?
Now that we’ve established the ground rules according to your specifications, how about citing some examples where the person in question was correct regarding the market? Don’t cite examples of what other people are doing or have done, that’s the classic straw – man argument; completely non – responsive. You said that the man’s position was (and I quote), “the chief economist of the NAR is generally a solid, widely-respected, highly competent professional.”
So let’s see some proof behind that assertion, please. If not, then it’s just your own personal opinion, and you’ve chosen not to respond to the links I provided to support my earlier contentions.
Dmac,
Read Lereah’s bio in connection with his hiring as EVP of Move.
http://news.move.com/phoenix.zhtml?c=192403&p=irol-newsArticle&ID=992808&highlight=
That amply justifies my description of him as a competent professional.
I don’t recall ever defending his predictions and have no intention of doing so now. Lereah himself has admitted he was wrong – that’s what professionals do.
You’re up to the usual game of asking me to defend a claim I didn’t make rather than the one I did.
$100 is equal to $159.86 according to the CPI. (Which is a joke but, I will use it for your example).
$48.30 in today’s dollars is equal to $77.21. That’s only a 20% increase in 17 years.
Could we make a deal where I give you 90.82 and you give me what $48.30 would equal at a 5% rate of return for 17 years. Comes out to about $110.
How much do you want to bet that that 90.82 is a lot closer to $77 in the next three years?
The article had nothing to do with this any way. All they are saying is people have lower percentage of equity than they did in 1990.
Joe, I hope you don’t really think a NAR “economist” would let on any bad news about the housing market unless they have no other choice. They are hired for the purpose of selling the real estate market as a whole. A realtor organization has no other reason to hire economists.
Had David Liarrhea gave an honest housing forecast in mid-2005 (the market may have peaked, sales are starting to slow down in some markets, and price declines are possible based on economic fundamentals) the NAR would have drawn and quartered him.
He was cheerleading the market all the way until the bad news was in plain sight for everyone to see, and then he said that the market had bottomed and that the recovery would begin next quarter. He repeated this prognosis every subsequent quarter until he was forced to resign to save what little credibility he has left.
The man might very well be smart and may have even known all along what was going to happen, but in no way shape or form was he EVER a reliable source for housing-related economic insight.
Pete,
You can hope all you want, but without avail.
I think NAR hires economists to be economists not salesmen.
I base that on years as an attorney for trade associations (including a very, very minor set of tasks for the NAR) and therefore with some familiarity as to how they make decisions, and how much influence they have over their professional staff.
I also base it on a fairly intimate familiarity with the standards that professionals operate under.
I also base it on some simple common sense. NAR’s members make business decisions based on those forecasts, and have little tolerance for losing money.
You want to call Lereah a liar simply because events proved him wrong! Grow up.
Anyone who thinks that people like Lereah are just bought and paid for by the organization that pays their salary simply doesn’t understand much about the way this world works or the people who make it work. I’m not saying that doesn’t happen, but there’s no credible evidence that it happened here.
And, since when have even the best economists been right more often than not?
“You’re up to the usual game of asking me to defend a claim I didn’t make rather than the one I did.”
Strike as non – responsive. What the heck are you talking about? Please give examples of when I’ve ever done that here previously – you’re really losing it here, Joe.
Dmac,
Re-read.
You’re right, I’m losing it. I often do that when people suggest ulterior motives for people taking higher-paying jobs in sunnier climates. I even do it sometimes when people hijack threads to make random attacks on people in the real estate industry. I do it sometimes when people put words in my mouth and challenge me for the words I didn’t say. Etc.
Zekas, you have drank way too much realtor koolaid if you think Liarrhea has any credibility whatsoever. How did this esteemed phD in economics not see a real estate downturn coming. I with my lowly BS degree saw it coming, and before 2005 I wasn’t even bearish on real estate. When the average working person is plunking down $300,000 because its the only way to get a home in a decent neighborhood, something isn’t right. It doesn’t pass the sniff test. This “professional” knew exactly what he was doing.
As a lawyer you face actual ethics requirements, and possible disbarment if you don’t comply. That is a very strong incentive to do what’s right rather than just what pays the bills at the moment. If economists could be disbarred, Liarrhea would have been stripped of his license with extreme prejudice and by now would be asking people if they would like fries or onion rings.
Pete,
Pete,
Thanks for confirming that you have no understanding of the professional ethos or the kind of standards that professionals internalize – whether or not they have a license to lose – or of the incentives that drive professional integrity.
When I do a search on your comments on this site and read a bunch of them together, I’m struck by the bitterness and resentment you have toward successful people, and how easy you find it to call them liars and fools.
I’m also struck by how very little you seem to know and how very much you pretend to. Name-calling seems to be your peak level of functioning.
I only read a couple dozen of your comments, and you can’t seem to find it in you to say anything positive about anything, or anything intelligent about anything.
I’m seriously considering dumping you and your ilk into the spam filter. It’s a very efficient spam filter.
If you have anything of value to contribute here, how about showing us. Otherwise, so long. Thus far it hasn’t been good to know you.
“I’m seriously considering dumping you and your ilk into the spam filter.”
http://tinyurl.com/262dxu
“We’re open for anyone to say anything.”
pbalmoenisa,
That long-standing policy is about to be refined.
We’ll still be open for anyone who has anything to say to say it.
But we won’t be open to people who just bash, trash-talk, call people names and shout down anyone who does have something to say.
Joe, I’d encourage the free-market approach – this blog is head and shoulders above many for intelligent & articulate discussion (please see the litany of nonsense & juvenile insults that seem to have taken over the Reader’s politics blogs).
Interesting info on the Depression/mortgages, I thought I had read about reform legislation to address the foreclosure problems at that time, but it’s been a while, so I’ll check it out.
“But we won’t be open to people who just bash, trash-talk, call people names and shout down anyone who does have something to say.”
So, no one who disagrees with you. Check.
It’s not about disagreement, z.
It’s about doing so in a civil manner and having more to say than just snide comments.
“”But we won’t be open to people who…shout down anyone who does have something to say.”
So you’ll be banning yourself?
You guys take this stuff way to seriously. If you would just realize that the mission here is going to run the spectrum of information here, from convenient links to development information & neighborhood updates, to the requiem ‘1990’s Danny Bonaduce & Kevin Trudeau like infomercials’ and puff pieces, to the NYC clowns (who have never even owned a dog house) that need to feel important by telling you Second City dwellers how to live your life.
It’s a business, and the crux of this site and its sister paper is dedicated to selling the word and information of their advertisers and developers. It is what it is.
I also believe it is time for the Chicago real estate and mortgage industry to hire this guy!
http://www.youtube.com/watch?v=4zbmENT4D0k
“I do it sometimes when people put words in my mouth and challenge me for the words I didn’t say.”
Please give examples of where I’ve done this to you – actual examples. You also obviously didn’t read any of my source links for my earlier opinions, but instead chose to respond in an entirely emotional and non – logical manner.
Are you not always complaining about other commenters here making statements without any substance to back up their claims? I provided such substnance, but you have not responded to them. Can’t have it both ways here.
Whoops, my bad – meant to say “substance.”
[…] to dread is the Zekas comment; they’re always incisive and usually correct. Joe takes on the MSM in this post but don’t start cheering. Two of my favorite Zekasms are his take on treating people like […]