How to Spot a Real Estate Shill

Normally, stupid quotes about real estate from the mainstream media are simply allowed to scroll across the screen here with the full knowledge that they are mostly harmless.

When a quote crosses the line from stupid to moronic, then maybe it will be read a few times just to get a chuckle or two.

When a moronic quote is from a source with a vested interest and it is clearly intended to influence the opinions of readers, then it's time to stop and expose the source as a shill.
How do you spot a real estate shill?

All you really have to do is read closely, think a little bit, and be able to type in a Google search box - the whole process takes a few minutes.

Such was the case for this San Diego Union Tribune story about rising rental prices.

Home Prices Down, Rents Up

According to the report, a good portion of the six percent annual increase for housing rentals in San Diego can be attributed to the continued demand from would-be homeowners who have chosen not to leave the rental housing market. Fewer residents leaving the rental market has resulted in fewer vacancies (less supply) which, amid steady demand, allows landlords to raise prices.

These prudent potential homeowners are instead waiting to see what happens with home prices that began falling in San Diego about a year ago. After home prices became detached from fundamentals earlier in the decade, this seems like a perfectly reasonable approach to the rent vs. buy decision now that a peak is clearly in place.

If you don't have to buy (who really does?), why not wait and see what happens?

Cue the shill.

Renters who anticipate a steep housing price drop may be disappointed, analysts say. Because the majority of homeowners have seen high equity gains in recent years, a sudden downturn in prices is considered unlikely.

The for-sale housing market reached its peak in fall 2005. Researcher Russ Valone of MarketPointe Realty Advisors said it's difficult to know when prices have reached their low point.

“The problem a lot of those people are going to have is, by the time we all recognize the market has turned, it will probably be too late” to make a timely purchase, Valone said.

It is assumed that the "analyst" and "researcher" are one and the same. If not, then author Emmet Pierce or some anonymous analyst deserves some of the scorn soon to be directed at one Russ Valone, and apologies to Mr. Valone will be forthcoming.

High Equity Gains Will Not Prevent Price Declines

High home equity may prevent "steep" declines or "sudden downturns" because many Southern California homeowners have what Alan Greenspan termed an "equity cushion". These products of contemporary financial innovation allow troubled homeowners to continue borrowing against their equity to make ends meet until the bank stops lending them money.

This is hardly a good long-term solution, but it does keep some families in their homes and it does keep some homes off of the market - not that anyone would really notice a few more homes for sale with the current bloated inventory.

High home equity will delay price declines, but it won't prevent them.

Prices are set at the margin - by homebuilders and motivated sellers pairing up with buyers who may or may not have any idea about the direction of home prices. The homebuilders and motivated sellers have been dropping their asking prices dramatically lately - something that even the dimmest homebuyer is starting to realize.

None of the buyer/seller price negotiations are affected by the high home equity of the majority of homeowners in the neighborhood.

You Could Do a Lot Worse than Missing the Bottom

The call to action that would prevent homebuyers from missing the bottom is clearly intended to rouse the animal instincts that have driven prices to current levels over the last few years.

It is a thinly disguised suggestion that if potential homebuyers do not act soon, they may forfeit huge price appreciation - something that has become ingrained in the minds of Southern Californians since the turn of the century, only starting to change recently.

According to the latest update from DataQuick, there is a clear top in place for the San Diego real estate market after a long run-up.
How long a run-up? You'd have to go back about three times the width of the chart above to get to the last bottom at around 1996.

The top prior to that? Go back another five years or so to 1990-1991.

What would make anyone think that after such long multi-year moves over the last two decades that a bottom may be at-hand and that potential homebuyers would be in danger of missing it? (Opinions from the clearly delusional pair of NAR President David Lereah and retired Fed chief Alan Greenspan may not be considered when answering this question.)

The only direct quote from researcher Russ Valone says it all, "The problem a lot of those people are going to have is, by the time we all recognize the market has turned, it will probably be too late” to make a timely purchase.

Don't delay! Make that real estate purchase today! Before it's too late!

Heed Mr. Valone's advice and by this time next year maybe you too can make it into the newspaper like these people from Orange County who are furious that prices are falling all around them.

A Partial List

Oh, and the third part about how to spot a real estate shill - after reading closely and thinking a little bit?

The part about vested interests?

From the Market Pointe Realty Advisors website, here's a partial list of their clients.