Q2 television in Billings did a little story about housing in late November, and they mentioned my video and interviewed me.  Here's the clip (opens in a new window):



Thanks so much to Dianne Baker and Q2 for noticing my original video and adding a little balance to the story.

The Billings Gazette published my Letter to the Editor in response to the 'No Bubble in Billings' article.  Readers rated it 4.8 out of 5 stars!

And the PBS Mediashift blog mentioned my video and website in a post about housing bubble blogs.

Well, well.  The Billings Gazette finally did a housing article, and what do you suppose they titled it?

No 'Bubble' in Billings

I'm not going to post a full critique, because this article contains very little new.  Just some Realtors talking about how house prices have been going up, so there's obviously no problem.  No mention of multiple price reductions, or much of anything else to indicate future trends.

One interesting part of the article is the reader comments at the bottom.  Many of them saw through the spin, and many pointed out the affordability problem.

I did write a letter to the editor.  It was not printed, though.  Edit:  Took 'em awhile, but the letter was printed on 12/3.  Here it is:

Dear Editor,

I was disappointed with the partiality of your article about the Billings housing market. The article essentially said, "House prices still rising and Realtors think they'll go up forever." I expected much more factual support and critical analysis than that.

Actually, the article mentioned three ominous market trends for readers who looked closely. First, inventory is way up. Second, days on market are increasing. And third, sales have slowed considerably lately.

Completely unmentioned in the article is the real problem: Affordability. High prices must be supported by high-salary jobs, which Billings has few of. House prices are up 50% in five years while wages are up about 15%. Irrational prices can be sustained only temporarily through the use of risky loans and speculation. But at some point fundamentals have to kick in and a correction must occur.

I hope no one is relying on the Realtors to publicly predict (or even allow for the possibility of) a downturn. Gazette articles from the 80's show relentless Realtor optimism all the way through that crash. Realtors may have the data and may be the "experts", but hearing their cheery quotes in the Gazette does little to tell us of actual market conditions.

I'd encourage anyone to talk to a home seller or straight-shooting Realtor, and many of them will give you a much different picture of the market.

I did a little research this weekend into the major housing downturn of the 1980's. Specifically, I looked at old copies of the Billings Gazette to see what writers and Realtors were saying about real estate at the time.

Comparing the 80's market to today's is tricky because of the oil bust, but that's not my point today. I just want to look at how things went down last time and what people in the industry were saying about it.

First I want to present a new graph. This shows inflation adjusted house prices in Billings. I used 1986 prices as the baseline, so everything is expressed as a relation to the 1986 index. A value of 100 represents inflation-adjusted 1986 prices. (Click for higher resolution version)



Now, on to my research. For all the housing stories I could find in old Gazette editions, I lifted the headlines or a choice quote about the housing market. I also tried to find a quote or two from a Realtor talking about the state of the market or their predictions for future house prices.

Finally, I matched up the dates of these news stories with the correct place on the graph, and the result can be viewed below. Gazette headlines or story snippets are shown in white. Realtor quotes are in red. I apologize for the cluttered graph, but it's very interesting to see what the industry was saying when prices were crashing:



If history is any indication, we can conclude that media reports lag significantly and are not necessarily a good indicator of actual market conditions. Had you relied on only the newspaper stories, you would have concluded that 1985 was a great time to buy. In reality, it would have been one of the worst times in recent memory to buy a house.

The other thing to take away from this graph is that Realtors were very poor at calling the bottom of the last correction. It remains to be seen whether recent Realtor quotes will look as ridiculous in hindsight as the 80's ones do today.