More Media Bubble Hype….

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Sigh…. they are at it again. The media’s obsession with Chicken Little and his “The sky is falling! The sky is falling!” panic is getting rather old…An article in today’s East Valley Tribune starts off with this little gem…

It was no easy summer for home sales. May was the worst May in three years. June was the worst June in six years. July was the worst July in seven years. And now August is checking in as the worst August in four years…

Worst worst worst worst. Using that word four times in the first five sentences of the article could certainly lead one to believe that the entire Phoenix real estate market is imploding. Do a quick Google on “real estate bubble” and you’re presented with 14.3 million results in 0.22 seconds (how DO they do that?).

Don’t get me wrong, it’s not necessarily a bad article. In fact, it’s chocked full of rather interesting data. Our fellow blogrollee, John Wake is quoted. (John’s a virtual treasure trove of Phoenix area real estate stats.)

What drives me batty is how the media insists on portraying the market as all doom and gloom. As in more nuggets from today’s article:

While the number of existing home sales increased slightly in August compared with July, it was still down considerably from August 2005.

Through August of this year, there were 47,515 sales, a nearly 40 percent decrease from the same time period in last year’s record run-up.

Note to self and readers: LAST YEAR’S RECORD RUN-UP. Comparing today’s market to the insanity of last year simply isn’t fair. As we said here long ago, last years sales and appreciation rates COULD NOT be sustained.

But wait, there’s more. Here’s my favorite!

. . .2006 will likely end up more like 2002, the last year before the market started its hyper upward climb, Butler said. (as in Jay Butler, Director of the Arizona Real Estate Center at ASU)

So check me if I’m wrong Sparky, but Mr. Butler is clearly saying that 2006 will be a normal year. Look at that closely again… 2006 will likely end up more like 2002 — the last year before the market started its hyper upward climb. Let’s face it folks, we have decidedly NOT been in a normal market the past couple of years in Phoenix. 50% annual appreciation rates are not normal. The insanity has subsided (because it had to) and we are returning to a normal market. It hasn’t imploded, the bubble has not burst, the SKY IS NOT FALLING.

Jay Butler is an oft quoted real estate economist. Of course oft-quoted doesn’t always mean he’s correct. Greg at the Bloodhound blog just down the road once asked Mr. Butler a question I’ve long pondered. (Did he ever take you up on that free meal offer Greg?)

In this case though, I think Jay Butler’s probably correct. After all, gathering sales numbers and comparing them to historical data isn’t exactly rocket science.

The frightening part of the media’s obsession with Chicken Little is that we ARE going into the slow part of the season. Sales WILL be down (they always are). I’m betting that little fact will be brushed under the rug or buried in the bottom of all the articles we’ll see in the next 3 – 4 months.

I can hardly wait.

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About the Author
Jay Thompson

I'm a real estate broker in Phoenix, Arizona and the publisher of the Phoenix Real Estate Guy blog. I tend to drive too fast and scream at the University of Texas and Denver Broncos football teams. My two kids are smarter than most adults I know and my wife is simply amazing.

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Candid and true. Everyone keeps talking about when we're going to "get back to normal". It's a ridiculous notion if you think about it. Since when is buying a significant asset with NO money down and then EXPECTING 20%+ appreciation been normal? Our view of how the world of finance works needs a serious adjustment.

**Christian´s last blog post..Getting Started in Real Estate</abbr></abbr>

We had a similar bubble being formed in India...

Now the prices are slowly correcting...

Normal Market -

In a normal market, there is fairly a large number of homes available and an average number of buyers. This market does not necessarily favor the buyer or the seller. A seller may not have as many offers on their home, but he or she may not be desperate to sell either. Again, it is the buyer's responsibility to be prepared. During a normal market, the chances to negotiate are higher than in a hot market. As a buyer, you can expect to make offers at lower than the asking price and negotiate a price at least somewhat less than what the sellers are asking...
www.ExchangeCA.com

I couldn't agree more -- sales are down from record highs, but that doesn't mean that the ship is sinking. The fact of the matter is that the real estate market fluctuates, and what goes up will eventually come down (but won't necessarily crash land).

Candid and true. Everyone keeps talking about when we're going to "get back to normal". It's a ridiculous notion if you think about it. Since when is buying a significant asset with NO money down and then EXPECTING 20%+ appreciation been normal? Our view of how the world of finance works needs a serious adjustment.

**Christianu00c2u00b4s last blog post..Getting Started in Real Estate</abbr></abbr>

We had a similar bubble being formed in India...

Now the prices are slowly correcting...

Normal Market -

In a normal market, there is fairly a large number of homes available and an average number of buyers. This market does not necessarily favor the buyer or the seller. A seller may not have as many offers on their home, but he or she may not be desperate to sell either. Again, it is the buyer's responsibility to be prepared. During a normal market, the chances to negotiate are higher than in a hot market. As a buyer, you can expect to make offers at lower than the asking price and negotiate a price at least somewhat less than what the sellers are asking...
www.ExchangeCA.com

I couldn't agree more -- sales are down from record highs, but that doesn't mean that the ship is sinking. The fact of the matter is that the real estate market fluctuates, and what goes up will eventually come down (but won't necessarily crash land).

Media is one powerful tool. With power, it requires a responsibility.

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