Housing bubble inflated by media, poor communication

Media impressions can sometimes give people the wrong impression, and nothing can make that more abundantly clear than the recent inundation of stories about the "housing bubble" bursting, and mortgage companies declaring bankruptcy.

Media impressions can sometimes give people the wrong impression, and nothing can make that more abundantly clear than the recent inundation of stories about the “housing bubble” bursting, and mortgage companies declaring bankruptcy.

While not on par with the still-completely-ridiculous Time magazine's 2001 cover “Summer of the Shark,” media impressions covering everything from evictions, mass foreclosures, and freezes in the construction industry might actually be contributing to the crisis, rather than reporting on it—a sort of self-fulfilling prophesy. Indeed, the most sensible quote since the media started reporting troubles at mortgage companies might have come from, of all people, a construction worker.

Robert Toll, head of luxury home builder Toll Brothers, spoke to The New York Times and essentially said that the housing crisis will be over once the press starts moving away from the story. He was criticized by some for blaming the media for the problem and not the bad business practices that led to the "crisis."

Like most things, the truth appears to be somewhere in the middle. As housing prices soared to record rates, homebuyers began to sit it out. Meanwhile, anxious consumers determined to own a house were offered huge mortgages at rock-bottom interest rates, and then began to feel the pinch as their mortgage payments started rolling in. Bankruptcies and foreclosures began to amass, causing profit losses to the mortgage companies that offered loans to subprime buyers, whose only crime was living up to the reason they're labeled “subprime.” They bought a house they simply couldn't afford. So no one is buying anything anymore and now the housing prices are on their way back down. The only real disaster is for the speculative building industry, which had big dreams of building McMansions for 200-grand and then selling them for 900-grand. That gravy-train has stopped and the industry is licking its wounds, now.

So what seems to be happening now, at worst, is that mortgage companies are reining in their handouts, and in a radical change to the way we seemed to do things recently, people are only buying houses (gulp!) if they can afford to.

They say the best way to combat speech you don't like is more speech. In that regard, Toll is only half right. It's not incumbent upon the media to stop reporting on foreclosures and the dropping profit margins of developers. It's incumbent upon affected industries to communicate the things that are positive about this economic development, such as communicating the fact that housing prices are actually coming back to a range that someone whose last name isn't Trump or Gates can afford. The low rate of unemployment and the fairly strong economy are also good stories to tell.

So yes, the media's attention to the “housing crisis” is probably over-hyped, but can be answered with strong communications and realistic business practices. In other words, just tell your story.

Have you registered with us yet?

Register now to enjoy more articles and free email bulletins

Register
Already registered?
Sign in

Would you like to post a comment?

Please Sign in or register.