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Wednesday, February 08, 2006

How to make headlines by ignoring the news...

Yet another sky-is-falling article in today's Arizona Republic, this one by business reporter Glen Creno. Nothing seems to be outrageously wrong in the factual reporting, although, as usual, there are very few facts and a lot of opinions, anecdotes and personal reflections. The real problem, though, is with the facts that are omitted.

An example:
The number of houses for sale in metro Phoenix has nearly tripled in the past year, based on December data from the Arizona Regional Multiple Listing Service.
This is simply irresponsible. The inventory of available homes last year was abnormally low. There are about 30,000 active listings right now. Two years ago, I would have said that 25,000 listings is a normal market. We've built 120,000 new houses since then, plus we went through last year's boom. I don't know what a normal market is now, and I may not have a clear idea for months. But to say "tripled" without saying anything about "normal" is just sensationalism.

Creno offers some loose conjectural reasons why inventories are up, but he fails to cite the incessant scare-mongering of the Arizona Republic.

However, "Mortgage rates have nudged higher," he says, another reckless claim the media never tires of making. Every time you read something about rising mortgage rates, click on this link. I wish I had a chart for ten or twenty years instead of just five. Mortgage rates are amazingly low and mortgage lenders make their money by writing loans. They have an incentive to keep new-loan-origination activity high. Other factors influence rates--but not so much, as Alan Greenspan discovered in 13 failed tries to influence them--but it is not unreasonable to expect them to stay low and possibly go even lower. That nothwithstanding, if you saw a chart of mortgage rates over the last 35 years, you'd gape in horror. Even so, people continued to buy and sell houses even when rates were over 20%.

Dr. Jay Butler, who apparently keeps his head where he can best monitor his gut feelings, weighs in with this profound scientific observation: "If prices and rates move up, we're in deep trouble." Oh, my.

Here's the real truth, which Dr. Butler could have given Creno were he not so devoted to undefended off-the-cuff remarks:

Those are the numbers for the last three Januaries from the Market-Basket of Homes. January of 2005 was a banner month, to be sure. But compare January of 2006 to January of 2004. January of 2004 was worse by every measure: Fewer homes sold at a higher rate of discounting with 22 more days on market, on average.

Whether we are really back to normal is a question I'm not prepared to answer until March or April, but our current real estate market is better than it was at a time when the Republic was not running scary stories about how bad everything is.

This is the actual news.

posted by Greg Swann | 7:35 AM  


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