Evidence of the Media Being Behind the Real Estate Curve
It is evident that the media is behind the investment curve. I studied this latent effect in a college business course, when I reviewed a study that looked at all of the top tier money magazines (for example Money, Forbes, BusinessWeek, ect…). The study assumed that an individual bought in to all of the magazines combined hot stock picks. The study found that following this strategy would net you a worse than -200% return. Yuck! The interesting conclusion we came to was that by the time the information had been printed in the magazine, it was common knowledge. That the information contained in the article was useless, because it was common to everyone, and the market had already adjusted for the news.
So how does this relate to real estate? Every day we are bombarded with news information about our local real estate markets. For the past 8 months I was bombarded with information about how the real estate markets were slowing down. Being that I am a constant practitioner of selling real estate (through transacting I constantly have my finger on the markets pulse), I can say that by the time the media started talking about a slowdown, it had already happened. Behind the curve once again. This is important, because many times when I first meet with real estate buyers and sellers, I find they are relying or are influenced by what the media has to say. A generally bad decision unless you want to be behind the curve.
Above is a graph from a company called Altos Research. Altos Research provides real time real estate data to customers (Stay tuned, I am currently writing a posting that will use Altos Research’s data to show how individualized neighborhood real estate markets are very different from each other). On their home page they show the above graph, which I thought is an excellent illustration of the news media being behind the real estate slowdown curve.
How do you estimate the market? How do you get your market news? Let us know what interesting uncommon information you rely on.
