Realtor ads “misleading”

From AdvertisingAge:

What Housing Crisis? Realtors’ Ads Defy Reality

The housing bubble has burst. Almost three-quarters of a million Americans are in foreclosure. The median price of a single-family home recently fell for the first time in at least 40 years, and many are predicting it’ll drop further in 2008.

But none of that stopped the National Association of Realtors promulgating a $40 million ad campaign urging Americans to think of buying a house as a get-rich opportunity.

“We believe there’s a psychological block” to buying a home due to negative media coverage of the subprime crisis, said Frank Sibley, senior VP-communications and conventions for the National Association of Realtors.
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However, in the light of the current market the “housing-market facts” could also be read as a historical look at an overheated market rather than a good predictor of what’s to come. Gary S. Becker, a Nobel Laureate, author and economic professor at the University of Chicago, said the ads leave out important information that consumers need about home ownership. “It’s a risky investment — unless borrowers recognize that, they could be misled,” he said.

Mory Brenner, a veteran consumer-debtor attorney who now writes on debt issues from a consumer point of view, put it this way: “Were the ads trying to lead you down a road with blinders on? I thought so. I found it objectionable and a little offensive,” he said. While without patently false statements or data, Mr. Brenner said the ads “are misleading and not especially forthright and, in a way, the way we got into this situation [the subprime-mortgage crisis] in the first place.” He chided the association for not producing a campaign more befitting its station. “They’re not some [real-estate agent] on the corner,” he said.
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Others were concerned about the premise the Realtors put forth in the ads that housing values are going up. Patrick Newport, an economist with Global Insight, an economic-forecasting firm, said: “In a lot of markets, housing prices are dropping, and in some markets — such as Florida and California — they are dropping a lot. If you buy a home, you take on a big risk,” especially if national housing prices drop 10%, as some predict, or if you lose your job and are unable to make mortgage payments, he said. He added that in many cases, “renting may be a much better deal than buying a house.”

Greg Daugherty, executive editor, Consumer Reports, said he understood that the Realtors are trying to make their case to stimulate business for their members. But “generally speaking, we don’t think people should look on their house as an investment,” he said. “Even if you double your money over 10 years, it’s not a huge return compared to the stock market,” he said, citing Consumer Reports studies that back up that point. “If you need a home, it’s always a reasonable time to buy one. But consumers should not look at buying a home as a get-rich-quick, or a get-rich-ever, scheme,” Mr. Daugherty said.

Jeff Lancaster, a wealth-management adviser in San Francisco and Silicon Valley, said the ads are sweeping some important facts under the rug. “I don’t think, in general, advising people today to buy homes for financial reasons is good advice. There’s very good reason to believe the price of residential housing in most communities in this country will be lower a year from now than it is today,” he said. “You could lose money.”