Realtors, Builders Assail ‘Big Crash’ Theory
To counter what they consider the misperception by some that the U.S. housing market is teetering on collapse, the nation’s two largest realty trade groups have launched aggressive campaigns aimed at boosting consumer confidence in real estate.
The National Assn. of Realtors, whose 800,000 members make it one of the biggest trade groups in the world, is working hard to spread its message to the news media that the nation’s housing market will remain “strong, good and viable” in coming years.
NAR President Norman Flynn has been touring cities across the country to “dispute the real estate death knell being sounded by some economists and doomsayers.”
Last month, he delivered that message to more than two dozen reporters at the National Press Club in Washington. And the following day, he held a news conference on the same topic that was beamed via satellite to hundreds of television stations nationwide.
Meantime, officials at the 157,000-member National Assn. of Home Builders have been meeting with editors at newspapers across the country to try to persuade them that the nation’s housing market is poised for several more years of steady growth and rising prices.
And in an unusual move, the NAHB helped produce a 12-page brochure featuring upbeat columns by housing analysts--including Barbara Allen of Wall Street giant Kidder, Peabody & Co. and John Savacool, senior economist with the respected Wharton Econometric Forecasting Associates--to counter what it calls the “doomsday scenario” being depicted by the media.
“The whole issue has gotten a lot of play in the media, and the headlines hurt,” said Jay Shackford, a vice president of the builders’ trade group. “We’re trying to take a leadership role in debunking this myth that home prices are going to collapse.”
About 183,000 of the NAHB-written brochures will be inserted in the April issue of Builder magazine, one of the industry’s leading trade journals. Thousands more have been sent to reporters across the country, while state and local builder groups will be able to order reprints for their own use.
The realtors’ and builders’ campaigns come at a time when sales, construction and even prices have dropped in many parts of the nation.
Home resales in the United States are down 5% from a year ago, and sales of new homes are at their lowest level in nearly a year. And although the Commerce Department said last month that housing starts had rebounded in January, it noted that the December construction rate was the lowest in seven years.
Sales of previously owned single-family homes in Los Angeles County are down 23% from a year earlier, while sales are off 16% in Orange County, according to the California Assn. of Realtors. Sales are down 47% in Ventura County and 19% in the Riverside/San Bernardino area.
The Southland’s new-home market recently has shown signs of a rebound, but the sales pace remains much slower than a year ago.
According to the Meyers Group--a real estate research and consulting firm--fourth-quarter sales of new single-family houses were down 56% from year-earlier levels in the Antelope Valley, where most new homes in Los Angeles County are being built.
New-home sales are off 42% in Orange County, 52% in San Diego and a whopping 76% in Ventura. In Riverside, sales are down 36%; in San Bernardino, they’re off 47%.
Despite the sharp drop in Southland sales activity, California’s realty and builder trade groups are not planning to duplicate the aggressive campaigns that have been launched by their national organizations.
“There’s no reason to panic, and there’s no reason to start some type of public relations campaign,” said Jim Antt, a Bakersfield broker and president of the California Assn. of Realtors.
“Prices statewide are going to go up about 9% this year, and sales are only going to drop a little. True, we won’t see the 16% appreciation rate that we saw last year, or the 18% appreciation that we had in 1988. But ’88 and ’89 were unbelievably strong,” he said.
“The 9% increase we’re forecasting for this year is pretty healthy.”
Added DeVere Anderson, an Encino-based builder and a member of the California Building Industry Assn.’s public relations committee:
“Sales have slowed down a little and buyers are a little bit wary. But that won’t last long.”
Anderson’s upbeat outlook stands in stark contrast to some widely publicized essays by several researchers and housing analysts, many of whom say that more hard times for housing lie ahead.
The latest is a report co-authored by a Harvard professor and graduate student saying that inflation-adjusted housing values could drop 47% by the year 2007, thanks to the graying of the baby boomers and the dwindling number of people entering the prime home-buying age.
Officials at the NAHB don’t buy that argument. They say that only half of all baby boomers own their own house, a factor that guarantees plenty of potential buyers in years to come.
They also point out that America’s population is still growing, albeit at a slower rate than it has in the past--yet another factor that should boost housing demand in coming years.
The builders also say that construction costs and land prices are rising steadily, and that no end to the increases is in sight. Even if demand dropped, values would keep rising or--in a worst-case scenario--level off because fewer homes would be built.
“It’s the basic law of supply and demand,” said Martin Perlman, a Texas builder and president of the NAHB. “If demand goes up, we build more homes. If demand went down, we’d build fewer homes. Either way, the law of supply and demand will keep the market balanced and support home values.”
Realtor economists agree.
“The so-called ‘baby bust’ generation won’t really affect the housing market until the end of the decade, and even then we don’t know what effect it will have,” said John Tuccillo, chief economist of NAR. “But regardless of what happens, demand for housing will remain strong.”
Builders and realtors are also united in the opinion that the media’s coverage of the housing slowdown is exacerbating the problem by scaring some buyers out of the market and making lenders jittery about loaning money.
The press “has kept up an incessant mewl of pessimistic drivel that has compounded the already significant disorder of our financial system,” Tuccillo said.
Writes builder Perlman, in the NAHB’s new brochure:
“Crazy as it might seem, the press is enchanted with a doomsday scenario. And the media digs up just enough tidbits of information to keep the presses rolling on the ‘big crash’ theory of real estate.”
Most of the articles that have builders and realtors upset appeared in newspapers last December or in early January. They include a Wall Street Journal article headlined “Home-Price Slump Spreads to Both Coasts, Causing Market Jitters”; a Barron’s article called “Crumbling Castles,” and a Newsweek piece simply titled “The Great Housing Bust.”
The Times’ Real Estate section also has been criticized by realtors and builders for a two-part series, headlined “The Big Chill,” that reported the Southland housing slowdown.
Although the relationship between the trade groups and the press may be strained, both the realtors and the builders realize that they need the media to get their pro-housing message out to the public.
As a result, both are trying to get their view of housing’s future across to reporters, editors and editorial writers across the country.
Besides addressing more than two dozen members of the Washington press corps at the National Press Club last month, realtor President Flynn taped a 15-minute pro-housing talk that was beamed via satellite to 650 television stations across the United States. Many used the footage on their nightly newscasts, said Liz Duncan, a spokeswoman for the realty group.
Flynn also has been traveling the country, telling reporters that the future of the housing market remains bright.
Earlier this month, Flynn and two of his public relations staffers made a three-day trip to the depressed New York market to tell their story.
The trip included a luncheon for nearly two dozen national magazine editors at Trump Plaza, where the trade group presented its own demographic study that it claims contradicts the notion of a coming collapse.
The report cites several of the same demographic trends noted by the builders. It also predicts that a variety of economic factors will push interest rates down over the next several years, which would open the door of home ownership to millions of new buyers.
But while the national realty trade groups are working hard to get their upbeat housing message out to the public, their California members remain sure that a statewide campaign isn’t needed.
“I’ll admit that sales are slower than we’d like, but they’ll pick up again soon,” said Anderson, the Encino builder.
“Things would have to get worse--a whole lot worse--before we’d have to start a PR program to get people to buy a home in California.”
