Perspective on Housing Market

I apologize for the "tease" in the headline for my previous post which indicated that real estate would be one of the topics of that post, but the post got too long and I decided to break it up into 2 separate posts.

As anyone living in South Florida knows, the real estate market has been a huge roller-coaster the past several years. Much of the ups and downs were driven by speculators who thought they knew what was coming down the road in a few years. One thing that has been sorely missing from the vast majority of real estate/housing market pieces written is historical context and how it can be used to forecast the next several years' performance.

I'm far from being an expert in this matter, but I've been a homeowner long enough to know that investing in real estate, in the long term, is profitable. I also know that the bubble burst we're seeing now is something we haven't seen in quite a long time. Some experts say the market will rebound in 2009, some say later. So, who's right?

Edward Schumacher-Matos, the Miami Herald's ombudsman, wrote a very good and balanced piece on the real estate situation, tackling both sides of the argument and coming to the conclusion that the Herald needs to do a better job of analyzing the pros and cons of each theory.

During the South Florida real-estate bubble of 2003-2007, some readers criticized the paper for being too much of a cheerleader, inflating the bubble. Cynics grumbled that The Miami Herald was in the pocket of realtors, who are major advertisers.

Today, with foreclosures rising, prices dropping and a flood of new condo units about to hit the market, the opposite is heard: The Miami Herald's coverage is too negative, stoking a crisis atmosphere that undermines the value of all homes; buyers are being scared away. ''Why does The Miami Herald seem to love reporting doom and gloom about South Florida's real-estate market?'' Sylvia Cherry of Coconut Grove wrote. What's the truth?

I have reviewed The Miami Herald's real-estate coverage over the past three months and talked with opposing experts, including realtors. It is hard to separate the coverage from the truth about the market. What I found was that many of the paper's real-estate stories have been excellent and fair, citing competing views. Realtors, understandably, are sensitive about negative articles, but there is no denying that there is a problem.

My complaint actually takes The Miami Herald into a riskier direction, but one that I think better serves us as readers if done right. Herald reporters and editors have been too scrupulous, in that they have been too timid. They have done the timely major stories and done them well, but they have not followed up with enough analysis or perspective of their own.

We need to better understand where the value of our homes is heading tomorrow -- as opposed to what it is today -- and how we might influence that. No coverage is more important to us than real estate, and The Miami Herald could be doing more than it is.

(...)

I have read all of the coverage and am frankly confused except to say that unsold inventory is way up, asking prices are sharply lower, actual sales prices in each sector differ, and the condo sector is especially threatened, depending partly on neighborhood and project. But veteran realtors such as Ronald Shuffield, president of Esslinger-Wooten-Maxfield Realtors in Coral Gables, are correct in saying that while the median price of a home sold today is $350,000, down from $390,000 last spring, it still is more than double the $155,000 it was in 2002.

In other words, prices are rolling back, as they have every 10 years, but your home is still worth a lot more than it was five years ago. This is scant comfort if you bought more recently, or borrowed against your home at the higher value, or, worse, if you were unwise or suckered into any of a number of mortgage schemes that are about to hit you with higher rates.

(...)

The Miami Herald has reported extensively and well about the dramatic issues of mortgage fraud and corruption in public housing. But what should the government do, if anything, about the middle class who might lose their homes in the vice of a correction or a crash? What are the options, their pros and cons?

Finally, there is the long-term perspective versus the short-term turmoil. The housing market will pick up again, you can bet on it.

The question is when. The bottom feeders already are moving in to buy distressed properties. There is only one shoreline, one South Florida, limited hinterland, and it is all becoming part of an international economy -- at a still relatively cheap price.

I would hope to see not just stories that deal with these issues directly, but with more of such perspective making it into everyday stories, giving them sense and context.