Editor’s note: This article is the introductory piece to a series looking at housing-bubble bloggers. Following this article, Inman News will publish several Q&A interviews with individual bubble bloggers throughout the week.
The list reads like a prophecy for real estate Armageddon: The Housing Bubble, Housing Panic, Housing Doom, Ready to Burst, Bubble Meter, Southern California Real Estate Bubble Crash, Seattle Bubble, The Jersey Shore Real Estate Bubble, Southern Maryland Housing Bubble News — and the list goes on and on.
These are titles for real estate blog sites among a giant genre that is devoted to a discussion on housing bubbles and the possibility of a real estate market crash. Despite the sensationalist blog names, the creators say their aim is not to scare people into hiding. Rather, they want to empower consumers with information and commentary about real estate and economic statistics so that they can make more informed decisions about housing.
The content at these sites can range from whimsical to analytical to cynical and everything in between. Some of these “bubble bloggers” attempt to poke holes in industry statistics and throw punches at industry practices, which can provoke heated responses from industry professionals who criticize their sites and question their motives.
But these blogs are obviously filling a need that has not been served by the real estate industry and traditional media, and they have built up a loyal following among consumers and some industry professionals alike. Some of these blogs are even generating income through online advertising.
Debi Averett, aka Twist, the creator and co-author of the Housing Doom Housing Bubble Blog, is a research scientist by trade with a master’s degree in botany. “I am very statistically oriented. I tend to overanalyze whatever I’m looking at,” said Averett.
She decided to focus her scientific expertise on the local real estate market after her personal experiences in the Phoenix area. Averett and her husband sold a home they bought in the Phoenix area in 2001 for a sizable profit in 2005 in preparation for a move to the East Coast. But plans changed and they ended up staying in the Phoenix area and renting a home. When they began looking for another home to purchase, they experienced sticker shock.
A year later, an equivalent home to the home they sold had increased in price by about 30 percent, Averett said. “The population didn’t go up 30 percent,” she said. “It just wasn’t making sense to me. Everything was out of line with fundamentals.” She became a fast believer in the teachings of economics professor Robert J. Shiller, who wrote a book titled “Irrational Exuberance” that relates to speculative behavior.
She dove into real estate data analysis, her son tossed out a name for the blog site and the Housing Doom blog was born. She laughs at the title because it doesn’t accurately reflect the site’s content or her approach, she said. “It wasn’t that I was expecting a housing meltdown. I do have a very moderate approach. I don’t think everyone is evil or everyone is out to lie to us. People need accurate information.”
Averett defines a real estate bubble as a rise in housing prices that is out of line with economic fundamentals, and she believes that low interest rates and the proliferation of exotic mortgage products and questionable appraisal practices have built up a housing bubble. But she does not believe that this bubble will pop. “Real estate by nature does not lend itself to a dead-cat drop,” she said. She exchanges information with other housing market analysts and area real estate agents, and pays a lot of attention to inventory and vacancy statistics.
And beyond the data, psychology is an undeniable factor in housing booms and busts, she said, just as it was with “Beanie Babies” or the California Gold Rush.
There is something alluring to Averett about the study of the real estate market, and she typically spends about six hours a day on research and writing for the site — seven days a week. “I get asked why I do this. Sometimes I wonder if it isn’t just my favorite soap (opera),” she said. Her audience is glued, too — the blog has about 2,000 readers per day, on average.
The rise of bubble blogs is likely tied to consumers’ thirst for real estate information, she said. “There are serious economic repercussions here. I think a lot of this came about because people didn’t have accurate information.”
Rich Toscano, a financial advisor in San Diego who in 2004 created Professor Piggington’s Econo-Almanac for the Landed Poor, a housing bubble blog, said he has been surprised by the response to his site. “It was never really my goal to start a big citywide discussion,” he said. The state of the local housing market was a topic of conversation that he first took up with his friends before taking it online.
“By 2004 I was pretty convinced that we were in a speculative bubble here in San Diego,” he said. “The more I researched the market here, the more I thought this was the wrong time to get into it.” And the more he talked up his bubble research with his friends, the more convinced he became that there was, in fact, a bubble.
Professor Piggington is a fictional and comical Victorian-era character that Toscano dreamed up to make the economic analyses more appealing and digestible, he said. “I did this kind of to amuse myself and hopefully to amuse my friends.” The site now draws about 2,500 unique visitors per day.
“I tried to put free, even-handed information out there. It seems that really is desired by people,” he said. Traditional media tend to rely heavily on sources with credentials, he said, which often means that industry-supplied data is a primary news source and people “get kind of a one-sided view of things.”
Like Averett, Toscano had no background in real estate but he had an interest in statistical analyses. And Toscano is also a renter — he had owned a condo in San Diego but moved to Austin, Texas, in 2002 and decided not to buy when he returned in 2003. “Right when I moved back I became convinced it was not a great buy,” he said.
Five years from now, Toscano said it should become clear in hindsight that San Diego is experiencing a housing bubble, he said, though he is also quick to point out that hasn’t been proven right yet about the existence of a local housing bubble — prices have not dropped enough yet to prove a bubble, he said. But this analogy has limits for Toscano — he believes that “real estate markets will never burst” as housing markets tend to deflate over time rather than crash immediately.
His bubble blog opened up a new career path — he found his current job through a reader at his site, got a writing job with a local newspaper and his Pigginton.com blog actually is turning some profit through site advertising. Toscano said he is paying a lot of attention these days to foreclosure data related to loose lending practices in which buyers got in over their heads during the real estate boom.
Some real estate professionals have criticized media coverage about the real estate market and blamed the media for slowing sales and for buyer fear, though Toscano said that market fundamentals are more to blame, and the industry could by the same token credit the media for the real estate boom.
“I think some people try to find a scapegoat,” he said.
Steve Cook, a spokesman for the National Association of Realtors, said that consumer interest in real estate has definitely been on the rise. “The value of real estate has become increasingly important to more and more Americans as the percentage of home ownership in America has risen and the attraction of real estate as an investment has grown. Housing, homes and real estate values are topics that unite neighbors and newcomers alike.”
All forms of media “are very aware” about the rise in real estate popularity, he said. Coverage of the Realtor association, itself, has grown from about 3,500 news stories in 2004 to about 9,000 in 2005, Cook noted. “It’s no surprise that many bloggers with differing opinions write about real estate.”
And while some bloggers criticize the data that is made available — or is not made available — by Realtor groups across the country, Cook said the association’s statistics “are not only unique, they are highly credible,” and serve agencies ranging from the U.S. Federal Reserve and U.S. Housing and Urban Development Department to the Chicago Board of Options Exchange. “Our data are … remarkably accurate and we work hard to make them so,” he said. One bubble blogger, who maintains the Bubble Meter blog, also maintains another blog site called “David Lereah Watch” that features a continuing critique of the Realtor association’s chief economist.
The Realtor group has reached out directly to consumers through advertising, including a multimillion-dollar campaign launched in November that promoted “favorable market conditions” for buyers and sellers, Cook said. Ads included the message: “It’s a great time to buy or sell a home,” which drew fire from some bubble bloggers. The National Association of Home Builders also has worked to promote real estate sales during the slowing market.
Savvy consumers, said Cook, “rely on the guidance of real estate professionals who are immersed in the industry,” as “national media reports about trends and developments in the housing market do not capture what’s happening in individual communities across the country.” Many real estate agents do keep close watch of statistics related to their market areas and some openly supply this information to their clients or the public at large.
Patrick Killelea, a renter-by-choice in the San Francisco Bay Area who maintains a popular bubble blog at his patrick.net Web site, said that the real estate industry has “a large vested interest in downplaying the bubble, no matter how real.” Bubble talk has become so popular, he said, “because there is cognitive dissonance between wanting to believe there is no bubble and knowing for a fact that there is. When all the local bubbles deflate, the discussion will go away.”
He added, “There is huge psychological tension around the massive amounts of money involved. Buyers want to believe they did the right thing, and will believe it no matter what the numbers in front of their eyes are.”
The national housing market shows some “bubbly” signs, and the San Francisco area “is clearly an extreme bubble. Other bubbly places now deflating are Boston, New York, Florida, Las Vegas, Los Angeles and San Diego. Places with no bubble are generally those away from the coasts, where house-price inflation did not really take hold,” he said.
Killelea is an engineer who works on programming for a large bank and formerly worked for a brokerage company. His work for financial institutions may have indirectly spawned his interest in researching real estate, he said, though it is “just simple math anyone can do.”
While offering a lot of serious talk and statistics, bubble blog sites can and do have a lighter side. The patrick.net site contained a post on Feb. 1, for example, that suggests a party to celebrate the real estate “catastrophe.” The post’s author suggests, “It could be called Bubblestock or Bubblepalooza.” That blog item drew 411 comments.
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