Housing Market News: The Data and the Dream

Organizations with large enough interests in the housing market to have research teams and economists on staff, often inadvertently undermine their own missions with the commentary they publish and distribute to the national media. Chief economists for the National Association of Realtors (NAR) and Zillow have recently issued statements that their membership and advertisers may feel tell only part of the story – and not the part that promotes interest in homeownership.

NAR’s Dr. Lawrence Yun made a number of headlines recently with this statement: 

“The housing market remains stuck in a holding pattern with little signs of breaking through. The pace of new listings is not catching up with what’s being sold at an astonishingly fast pace.” – Lawrence Yun PhD. – Chief Economist, National Association of Realtors (NAR) in July 2017 Pending Home Sales Index.

This quote, along with data and additional comments, resulted in this headline on Reuters, CNBC and Fox News: “U.S. existing home sales stumble as prices hit record high.” Realtors nationwide acknowledge and have felt the effects of tight inventory in their communities and business, but there are several other market factors that offset Yun’s bleak assessment. For example, home equity is on the rise according to Black Knight Financial Services’ (BKFS) July Mortgage Monitor Report, putting 4.41 million Americans in position to refinance or sell with a down payment to move up. Mortgage interest rates are also hovering near annual lows which industry professionals know has a far greater impact on consumer home purchasing power than property prices.

Unfortunately, “the rest of the story” – such as the positive impact of increased homeownership on neighborhoods, communities and individual consumer financial health – gets lost in statements like Yun’s and the ensuing headlines, along with the fact that increased equity benefits the broader economy when homeowners use those dollars to make home improvements or invest elsewhere. As a major trade organization, it’s logical for the NAR to interpret and publish data as an industry authority, and for-profit entities like Zillow to do the same to raise brand awareness and build similar clout.

The following recent quote by Zillow Chief Economist Dr. Svenja Gudell seems to hinder the efforts of the MLOs and Realtors that Zillow raises significant revenue selling advertising and lead access to:  

“A 20 percent down payment on a typical U.S. home costs more than two-thirds of the median household income, but can cost up to 180 percent of the median household income in pricier housing markets like San Jose and Los Angeles.” – Svenja Gudell PhD. – Chief Economist, Zillow in August 2017 Consumer Housing Trends Report.

What Should the Headlines Say?

While accurate, Dr. Gudell’s statement reinforces and perpetuates the common public misconception that a down payment of 20% is necessary to buy a home and casts a pall of pessimism, thus adding an extra layer of difficulty and objection to the already challenging jobs of MLOs and Realtors. Producers in the business of helping people buy, sell and finance their homes are familiar with the abundance and availability of low down payment mortgage products, but public awareness is lagging behind. The ability to get a mortgage with less than 20% down is not only an option, but Americans are clearly taking advantage of it:   

“The median down payment for single family homes and condos purchased with financing in Q2 2017 was 7.3 percent of the median price of the homes purchased. That 7.3 percent was up from 6.0 percent in the previous quarter and up from 5.9 percent in Q2 2016 to the highest level since Q3 2014, when it was 7.4 percent.” – ATTOM Data Solutions, Article September 5, 2017.

This information would be welcome and uplifting to consumers who feel like homeownership is distant or out of their reach, but unfortunately, headlines like this are rare: “The average down payment on a home was 7.3% in the second quarter!” Online searches will reveal a few stories by industry trade publications about low down payment averages and usage, but they’re not in the mainstream media. 

Economists don’t consider the sales aspect of the housing market except when it comes to analyzing the periodic numbers – they simply state the facts they uncover. Additionally, the mainstream media doesn’t necessarily know how to present balance in housing market news and related topics, nor does doing so always fit their agenda.

MLOs and Realtors need to work to become the trusted source of housing market information for consumers to make sure failure to feature important details like the prevalence of low down payment mortgages doesn’t prevent someone from exploring their homeownership options. Marketing to your various databases and through different channels including social media presents great opportunities to get good and useful news to the public. Drip campaigns, single email blasts and blogs are excellent ways to share interpretations of industry news and valuable information, and present options people may not realize are available.

You may not be able to influence the mainstream media, but you can be a valuable resource for your partners, prospects and past clients. Stay apprised of what the experts are saying, but remember: Economists deal in data… MLOs and their Realtor partners deal in the American dream.