‘Irrational Exuberance’ Back In Housing

There are two real estate reporters I like to follow on a regular basis. CNBC’s Diana Olick and the Chicago Tribune’s Mary Umberger. Why do I like them so much? Because they don’t hold back on reporting the real conditions of the U.S. and Chicago housing markets. I remember them pretty much telling it as it was as the United States went through that housing bubble and subsequent crash- while many of their colleagues assumed the role of self-appointed real estate cheerleaders even as home sales and prices plummeted.

And these days, I’m detecting ‘irrational exuberance’ again in residential real estate. It’s not just me either. Umberger wrote in last weekend’s Sunday edition of the Chicago Tribune:

If the Chicago real estate market were a patient recovering from a lingering, debilitating illness, the doctor might be obliged to set the patient’s over-expectant family straight: Yes, your loved one’s symptoms have eased up, says the MD, but, gee, it’s a little too soon to be training for a marathon.

Those are the kinds of expectations that many Chicago-area homeowners seem to harbor these days, according to Naperville appraiser Alvin “Chip” Wagner, whose recent newsletter to members of the local real estate community sought to address a form of irrational exuberance he’s seeing lately: Yes, the market is better, but that doesn’t necessarily mean your home is gaining in value — in fact, some prices might fall further.

(Editor’s note: Italics added for emphasis)

Umberger interviewed Wagner, who had this to say about Chicagoland homeowners being overly-optimistic. From the piece:

Well, absolutely, the market is improving, but not in the area of pricing, which is what homeowners want to know about. In the third quarter, the average sales price throughout the area was $244,203. One year ago, the average was $258,364. That’s about a 5.5 percent decline.

Yet, I go to people’s houses to do appraisals, and (the homeowners’ expectations are) driven by what they see in the media, and they say to me, the market has picked up, and they expect their house is growing in value. They expect to see a 3 to 5 percent growth. I end up having to tell them, your values aren’t appreciating, they may be flat or even declining.

(Editor’s note: Italics added for emphasis)

I don’t like hearing about the housing market being crummy as much as the next person. But what I do like are people being straight with me. Especially journalists.

“And (the homeowners’ expectations are) driven by what they see in the media.”

See what I mean about those cheerleaders? This is why I like straight-shooting reporters like Olick and Umberger. Wish more of their contemporaries could be like them, instead of barfing up a whole lot of nonsense all over my computer screen.

Source:

Umberger, Mary. “A reality check on housing market.” Chicago Tribune. 30 Nov. 2012. (http://articles.chicagotribune.com/2012-11-30/classified/ct-mre-1202-umberger-housing-20121130_1_number-of-active-listings-naperville-appraiser-sales-price). 7 Dec. 2012.