Are False Headlines Created To Scare Consumers?


scared-consumerI was sitting at Giant Coffee scanning a USA Today someone left behind and read the following headline, Housing bust’s recovery hampered by tight credit. As a Real Estate Guy who just witnessed an uptick in prices of over 30% I’m totally confused. I know nothing about a recovery being hampered. Nor do I see mortgage companies employing tough lending standards,

Perplexed, I read the article. USA Today reporter, Julie Schmit, writes about a couple who are first time home buyers who want to buy a home,  but damn it, they actually need to prove they are credit worthy. Can you believe they have to provide pay stubs, tax returns and other documents to demonstrate they are not a credit risk. Get this, it is happening to other people too.

Let’s get back to this misleading headline for a minute. Ms. Schmit is saying the recovery is being hampered and it is being done because of tight credit standards. Is there truth to either statement? I don’t think so…

price per sq ftThe US housing market has and is seeing a fantastic rebound. Since I practice real estate in the Phoenix market I can only state, with authority, what is happening in our market and we are seeing a significant rebound in home prices. In Q1-Q2 of 2012 many sources reported a 20%+ increase in home values. Although prices stabilized for Q3-Q4 2012 we saw another bump earlier this year. The graph to the right, provided by the Cromford Report, gives a nifty graphical look at home values in Phoenix. My question for USA Today is: how much value increase do you need to report an unhampered recovery?

The second falsehood in the headline is the statement “tight credit.” One would think that current mortgage policies are unusual and causing a problem with the housing market. Nothing could be further from the truth. With the exception of a short period of time from 1999 to 2008, one always had to jump hoops to get a home loan.

We do not have a “tighter credit” situation going on, we have normal qualifying standards in place and the short period leading up to the bubble burst was the anomaly.  Even the author says this in the article… Still, the first-time home shoppers are in a situation not unlike that faced by millions of Americans in the years preceding the start of the housing collapse in 2006.

Since neither statement used in the headline, Housing bust’s recovery hampered by tight credit, is true, one has to ask why write it? I have a few ideas:

  • Scare people.
  • Remind people how powerless they are.
  • The author is simply too intellectually deficient to recognize the lie.
  • Fear sells papers.

What I really want to know is… What do you think?
I hope to see a lot of comments with your thoughts and ideas on
why we are bombarded by false headlines and destructive news stories.

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