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.

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.

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.”

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6 Responses to Realtor ads “misleading”

  1. Shore Guy says:

    I am shocked. Shocked! NAR not telling the truth? Gasp.

  2. 3b says:

    People can lose money or over pay,a nd once you ahev pver paid, you will always have over paid, even if it supposedly works out in the end, like 10, 20, 30 years down the road.

  3. chicagofinance says:

    Ya’ gotta Bend It Like Becker… many Nobel Laureates? …I lose count…

  4. njrealtor says:

    You think the NAR is being untruthful?! What about the Media! Since when can we say that what goes on in one place must be happening in another! Real estate should never be talked about in broad brush strokes like stocks. 1)every town is different, some times you need to even break up the town to get a clear picture of what is going on in that towns real estate market. In parts of Bergen County New Jersey real estate has actually gone up from last year. 2) whether you make money on real estate depends on many factors: you have to ad the cost of living somewhere to your homes worth (if it is a family home), you have to ad back in the tax savings, the home equity loans you have taken out of the equity of your home. Most people in the Bergen county area I find are still making money on their homes. The ones who aren’t are people who had no business buying a home in the first place, who got loans from banks who should never have loaned them the money. These are people who had no savings, no credit, had never paid a bill on time in their lives, couldn’t put a deposit down and didn’t even have enough money for closing cost; of course they were getting in over their head and I blame the banks for putting there!
    Real estate is something tangable, it has cycles just like anything else in the world. One should always do their homework no matter what or where one is investing. One can make money in real estate even today but you need to know what you are doing and you can’t invest according to what the media publishes no more then you would pick your clothing size by national averages the media gave you.

  5. SNJMark says:

    You hear that people? A realtor says that “every town is different”. Haven’t heard that one before.

    Something big must be brewing. Random realtors are starting to come out of the woodwork and onto this site.

  6. Investor says:

    6% compounded over 10 years = 79%. Not quite sure I would call that “almost double”. And this is before inflation mind you…

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