Steadfast Finances
A Personal Finance & Investing 101 blog that delves into current events, consumer education, and techniques to improve your bottom line.
Why Are So Many Mainstream Media Websites Saying Real Estate is a Bargain?
I occasionally wonder if some publishers are pushing an agenda, or if they don’t follow the trends closely enough before they give advice to us common folk. I say this because many of the well respected finance websites I frequent have been increasingly hyping real estate as if it were a serious bargain, or in the more aggressive articles, that we’re a fool not to jump in now.
For example, take a look at a few of the images I captured over the last month or so.
Not to go all A Beautiful Mind and start finding hidden messages in periodicals, but have you noticed the growing frequency of positive overtones about real estate coming from mainstream financial media?
I’m all for being positive, but the simple fact is that real estate prices are expected to fall even further according to Zillow.com trend analysis. If you needed more proof that the slide isn’t over, just look at the unprecedented (more like desperate) programs the U.S. government is rolling out to put a bottom in the real estate market. These programs do nothing but give a short term boost, much like a sugar high, where they make the numbers look solid by enticing a few new buyers off the sidelines, then after the rush is over, the downward correction goes on it’s merry way.
I get that it’s important to inform readers that it’s a good idea to buy financial assets when prices are depressed, but just because something loses 20% value from it’s all time high, doesn’t mean that it’s a bargain. In fact, if you study the psychology of an investment bubble, this sort of rationalization is known as a “bull trap“. And let’s just say the results of falling for aren’t pretty.
If you enjoyed this post, make sure you subscribe to my RSS feed, or follow me on Twitter or Facebook! Related Posts Related Websites
6 Comments
Mar 25, 201010:13 am
We humans tend to overemphasize recent history. When we look at real estate prices, we realize that real estate has done pretty well since 2000. Judging from this relatively recent experience, real estate is still a great investment. The price decline is just a little bump. But when you look back further, the picture looks different. Then you would see that neither the real estate boom nor the bust were normal.
[Reply]
Mar 25, 201010:44 pm
Apr 14, 20109:43 am
Remember, these “respected” publications were the same ones that were hyping up the real estate market as the bubble got bigger and bigger. Few took the responsible approach and saw the market for what it was, and instead kept pushing why now was a great time to buy. A “bargain” is always going to be relative, just as a “great buy” is. People need to stop worrying about what the press is selling them on and start worrying about the fundamentals.
[Reply]
Matt SF Reply:
April 14th, 2010 at 10:21 pm
Well said Joshua. I believe if these experts were writing to educate, instead of writing for keywords on the hot new investment flavor of the year, there would have been far more respected publications going against the herd.
Then again, sticking your neck out in the publishing business probably isn’t the smartest career move, so I suppose it depends on how many times you’ve been proven right and how well your legal department responds to litigation threats.
[Reply]
Joshua Dorkin Reply:
April 14th, 2010 at 10:45 pm
Matt – I know for a fact that many of the publications putting this kind content out are absolutely doing it to chase the hot keyword of the moment. Sad, actually.
[Reply]
« My Lending Club Investment Portfolio Performance Next Post
Kill the Fine Print, or Lose My Business! »
Popular Posts
Should We Adopt a National Sin Tax on Junk Food to Reduce Obesity Epidemic?67
Visualizing How the Things You Own, End Up Owning You65
My Plan to Beat the Lending Club, Peer-to-Peer Investing Average53
Living Beyond Your Means: School Bus Driver Losing Her $800,000 Home to Foreclosure49
10 Reasons Why Investing in Gold is a Bad Idea49
Blog RSS Feed
Follow Me on Twitter
9:55 am
It’s the association of realtors marketing machine in action. My guess is a good amount of the articles you are seeing are paid placements looking to do exactly what you outline. Which is to get people off the sidelines.
Friends of mine who bought two years ago see things like this and insist they made a good investment.
I take more stock in articles like this: http://www.bloomberg.com/apps/news?pid=20601206&sid=arV3UB4Bj868
At least the messaging has changed from the tried and true “real estate always goes up”
[Reply]