Lansner’s mailbag: Housing crash is media’s fault
Insight into the comments I get from my readers — good, bad, or in-between — and my thoughts about the feedback.
“Mailbag” gives insight into the comments I get from my readers — good, bad, or in-between — and my thoughts about their feedback.
I’ve been a business journalist far too long, so excuse my cranky old-guy thinking, but I know the economy is at a major turning point when the media becomes the assumed problem.
You see, this logic suggests that if journalists stopped distributing “bad” news (the definition of “bad” is up to the reader’s viewpoint) folks would act differently, and the economic problem would vanish. Got it?
And no industry emotes that blame-the-messenger passion with greater energy than real estate.
California renters could save $112,000 vs. owning over 5 years
My recent columns suggesting California’s housing market looks a tad dicey — even suggesting that renting could be better than buying at this moment — filled my inbox with comments like this one: “They should title Lansner’s column, ‘Weekly Rubbish.’ “
Here is a sample of what my readers think, and my reply to their critiques.
Reader: “If you and other reporters predict a softening in the real estate market, of course, it becomes a self-fulfilling prophecy. People will stop buying and want to wait for the media-predicted crash and lowering of home prices. Being in business for almost 40 years, I have seen many cycles and in most cases, it starts with the media.”
Me: The best financial decisions are made using a wide assortment of information, both the pros and cons. If people are making a huge investment such as buying a home based on one person’s view — whether that be a family member or friend, a real estate professional or investment adviser, or a journalist — that’s a mistake.
And there is plenty of real estate industry hype countering one jaded columnist’s viewpoint that California homes are vastly overpriced today.
Reader: “You are paid by hedge fund managers to stoke fear in average Americans about holding on to their houses — the only way left for ordinary people to build family wealth. The people who pay you are snatching up income property because they have so much money they don’t know what to do with it. They want to make renters out of the rest of America. You are helping them achieve their goal. Do you feel good about that?”
Me: Yes, the owners of my newspaper group do also own hedge funds. I’ve never heard a word from them, nor have gotten any direction from my Southern California News Group bosses about any anti-ownership agenda I should follow with my work. Offering my audience information about the risks of homebuying in these uncertain times isn’t part of some grand plot. Instead, it’s a mild antidote to the “every day is a good day to buy” mantra from the real estate transaction industry.
PS: Folks considering a home to own for a long time worry far less about “timing the market” and focus more on how much home they can comfortably afford. If the price and payment meet their budget, go for it!
Reader: “You have done a disservice to those on-the-fence buyers wondering if they should jump in. Wealth is made in real estate. Scaring folks off with low ball numbers as your premise is a waste of time.”
Me: You highlight a key problem. We have a system titled toward wealth-building in housing, and that profit motive is also what makes it such a financially challenging purchase for so many people. You also overlook the many other ways to build wealth, starting with having a savings mentality and placing spare cash in a diversified basket of assets.
Reader: “I can’t tell you how much I not only strongly disagree with you saying renting can be better or save you money. It is NEVER EVER better to rent than own. The numbers don’t lie. You will always be ahead by owning, assuming you can afford the mortgage.”
Me: You do recall the mid-2000s when “assuming you can afford the mortgage” was an afterthought? Plenty of renters learned a hard lesson in that era — ownership isn’t for everyone.
Reader: “How you got to your premise was all predicated on No Money Down. What universe are you inhabiting?”
Me: To fairly compare buying to renting, financially speaking, you have to account for the often six-figure investment — the “downpayment” — used to lower a buyer’s house payments and qualify for a mortgage. That’s no small sum of money and it’s a “cost” to buyers. So, I eliminated it from my analysis to make for more apples-to-apples math.
Reader: “After 30 years, the owner has no mortgage payment and the renter still owes rent.”
Me: Yes, that can be true — with the one big caveat: I don’t want to think about how much maintenance and upkeep has cost me after 35 years of ownership — not to mention property taxes and home insurance. My mutual fund managers never call up and say, “We’ve got a leak in a wall, help us pay for that!”
Reader: “Will prices fall so hard that we have a wave of homeowner loan defaults like 2008-10? Doubt that will happen this time, but a more ‘normal’ housing recession seems likely in the next year or two.”
Me: Seems reasonable to me. And thanks for acknowledging that housing dips come in many shapes and sizes. Look at the 1990s, when California home prices essentially went sideways for six-plus years.
Reader: “You have a fresh take on the real estate market and some good perspectives on why, in California right now, buying is a tough sell vs. renting — something you won’t hear from industry proponents.”
Me: It’s certainly possible with current market dynamics that a renter who delays a purchase — and ups their savings — could be in a stronger position to buy in a few years.
Thanks for the kind words. I don’t get paid by my hedge fund owners to automatically echo what the real estate industry says.
Jonathan Lansner is the business columnist for the Southern California News Group. He welcomes feedback from readers! Hew can be reached at jlansner@scng.com