USA Today Housing Report Is Shameful Journalism

Have you ever started reading an article and realized that its author was hell-bent on making a point, who just started grabbing clips and pieces of conversations that supported her point? I found a shameful piece of journalism yesterday at the USA Today Housing website, and thought I would write a rebuttal piece for people who are on the fence about buying a home.

Just to clarify my position from the start, I make my living helping people buy and sell homes, so I obviously have a bias as I sit and write this. But also know that I authored the article Why Now Is Not The Time To Buy A Home in January 2010, and I provide a regular stream of analytical real estate reports designed to create public awareness of housing market conditions. So yes, I own a real estate company, and yes, I have a bias towards real estate ownership, but that does not make me a sing-song REALTOR® who always is preaching now is the time to buy!

I would expect a journalist working on behalf of CNBC.com and USA Today Housing to be held to a higher standard than a typical online marketing person. What ever happened to the days of diligently researching a topic before going to print? Does Shelly K. Schwartz, the freelance writer engaged by CNBC.com and USA Today, not realize that many people read and trust both CNBC and USA Today Housing? For that matter, do these news sources still have editors? The trustworthiness of these organizations seems to be about the same as one would expect from Twitter.

There are many valid points made in the article, and many by wise and influential thinkers in our society. I concur with most of the points, it is the analysis and thus the conclusion that makes me wonder just how long it took the author to slap this story together. For example, quoting Yale economist Robert Shiller, when discussing the purchase of a home for residency, Dr. Shiller states

This is not a financial investment. Its an investment that provides you services and you have to answer for yourself how you value that.

The biggest dividend of real estate, says Shiller, is the lifestyle it affords. Some are willing to pay a premium for kid-friendly neighborhoods, quiet streets, a historic home or a condo close to work.

Agreed. And he continues:

If youre doing it more with investment motives, then I think you have to be careful, I wouldnt be overly influenced by the idea that home prices are low, and they might suddenly take off — thats whats coloring some peoples thinking now.

Amen. As a matter of fact, I report on this each week in my Tallahassee Real Estate Newsletter. We know were in for a long and bumpy recovery.

USA Today Housing Report Drops The Ball

I wouldnt be writing this rebuttal though, if I agreed with everything in the article. In fact, when the author starts to quote people on numbers, it is apparent that she got what she needed, and just moved on. For example, she quoted former Federal Reserve economist Jack Francis in comparing asset classes:

From 1978 to 2008, he found, the S&P 500 returned an average of 11% a year, while U.S. small-cap stocks produced an average return of roughly 13%. Single-family homes posted less than a 6% gain.

Im wondering how she jumps to comparing apples with oranges? Do you think somebody who chose not to buy a home instead chose to live in the street so that they could shrewdly invest their monthly rent in the S&P 500 or a group of U.S. small-cap stocks?

I dont think she considered the fact that people who choose not to buy a home must choose an alternate method for sheltering themselves and their families. Its not buy or dont buy, it is buy or rent. I wonder what the rate of return was for those tenants who invested in rent compared to the S&P 500? [note: sarcasm: rent is not invested, it is spent]

The author doesnt stop there, she jumps right into another apples to oranges comparison. She writes:

Moving from an apartment to a single family home often means commuting from the suburbs, which requires you to purchase a car, pay insurance and fill it with increasingly pricey fuel rather than using more affordable (and planet-friendly) public transportation.

Huh? Is she implying that tenants only live in apartments (attached housing) and home owners live in detached housing in the suburbs? What about in-town condo owners? What about single family detached home tenants in the suburbs? Why does she make a convenient leap to owning = commuting? How easily she made owning ones residence include a car payment, insurance payment and poisoning the planet.

The article continues with more truths, half-truths and un-truths, but unlike this blogger, the author most likely was paid by the word . You can read the article in full at the USA Today Housing site.

Points To Consider When Choosing A Home

• Whether you decide to buy a home or rent a home, you are making a decision on the quality of life that you want. Both options have merits and this is not to say that one choice offers more quality of life than another. It is about understanding your own goals and desires.
• Financial ramifications should be considered. Depending on the market where you live (read that as saying study housing supply and demand), most likely 5 years should be your magic number if long-term wealth is your most important criteria. This magic number refers to the amount of time you plan on spending in the home. If less than 5 years, then most likely your closing costs will be greater than appreciation, whereas if greater than 5 years, than market appreciation most likely will reduce the cost of ownership.
• Unlike the article referenced here today, I must mention that whether you buy a home or rent one, there is a cost of living associated with your housing solution. Choosing one form over the other does not suddenly provide you with money to invest in other asset classes, thus the use of comparable investment opportunities is misleading and uninformed.

Real estate values in Tallahassee have dropped roughly 30% since the top of the market. If somebody purchased a home in the last five years, they most likely will need to live in the home ten more years to offset this devaluation. People who purchased 10 years ago still have more value in their home than they paid. It is during market extremes like these that the short-sighted masses come forward to cry this time is different. I dont think so, we are just in an extreme market correction that was needed to counter an extreme market expansion. The real estate market will return in full force, the question that stands is will you be living in the home you own, or renting one from somebody else.

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