August 29, 2007
Wednesday

One year after the end of the boom market in housing, the New York Times reports we're getting the first ever, official indication of a decline in the median price of American homes. The paper quotes research firm Global Insight as estimating, "that the home-price index to be released Thursday by the Office of Federal Housing Enterprise Oversight, a regulatory agency, will show a decline of about 1 percent between the first and second quarter of this year." The thundering import of this tidbit of information lies in the fact it will be the first time since Uncle Sam started crunching housing data and releasing figures for public view in 1950 that we will have seen a drop in the median price of the American home.

I'm of two minds about early releases by major media outlets of important economic news that A-has not yet ripened into fact and B-could cause a bear housing market to head further south. On the one hand, it's good to be first with important economic news. On the other hand, do media outlets really perform a public service when they pre-release purported "data" that could have the power to create true (perhaps negative) market impacts separate and apart from actual market forces such as supply and demand?

The article goes on to say, "Economists say the decline, which could be foreshadowed in a widely followed government price index to be released this week, will probably be modest -- from 1 percent to 2 percent -- but could continue in 2008 and 2009. Rather than being limited to the once-booming Northeast and California, price declines are also occurring in cities like Chicago, Minneapolis and Houston, where the increases of the last decade were modest by comparison." Cautiously worded, I admit, but still jarring to people concerned about home values.

This is not a jab at the New York Times, the clear leader in its field. But as goes the Times, so goes the rest of the journalistic community. As an ink-stained veteran of the news and opinion business, I recognize how brutal a business it can be. Firstliness, not cleanliness, is next to Godliness.

Being right is important too, but being first is all-too-often even more important at least as important. So the question here becomes, should media outlets let competition drive them to the point where they unintentionally inflict economic harm on people?

A good example of how media overreaction and fear-based reporting can cause actual harm is evident in today's stock market. August must have set some kind of record for media panic over not housing, but stock market swings. In early August as the market was overreacting to news of mortgage company troubles, media outlets were right there with the market overreacting as well. "Nutty," "jittery" and "lunatic" were words I saw used in headlines and media reports as the market tumbled, taking with it investor confidence and billions of dollars in paper assets. It felt like 1929 was upon us again. Here we are just weeks later and the market has settled and even managed a 2.3 percent gain last week.

Can we stop media overreaction to economic news? No. Markets are based on greed and fear. They are so much more about psychology and confidence than they are about underlying rock hard economic data. We can't expect members of the media, the journalistic establishment as it were, to behave any differently in that regard than people in other industries. But we could label such stories as "opinion" so savvy consumers are forewarned to give them less credence.

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