THE MORTGAGE MELTDOWN
Bloggers: alternative voices on housing risks
By Alana Semuels
Times Staff Writer
March 24, 2007
Foreclosures are rising. Prospective buyers with shaky credit can’t get loans. And with the spring home sale season starting to blossom, buyers and sellers are trying to divine which way the market is heading.
In years past, real estate agents were often the only sources people could turn to for information on the state of the market. But increasingly, bloggers are filling that role, touting themselves as independent sources in a field crowded with vested interests.
Some of these scribes have earned the respect of mainstream industry observers who credit them with being ahead of the curve. Kudos have come their way for predicting that the real estate bubble would burst and warning borrowers about the dangers of high-cost sub-prime loans with artificially low teaser rates.
“Some of the best reporting in the past year has been from the blogs,” said Bradley Inman, the publisher of Inman News, a real estate trade publication. “The bloggers were unabashed critics. They were unconstrained about what they said.”
Three veteran bloggers — Rich Toscano, Ben Jones and Patrick Killelea — wrote extensively of a housing bubble two years ago, while prices were still moving higher.
They questioned the “cheerleading” about rising homeownership, Inman said, and earned praise from readers whom they helped persuade to hold off on purchases.
“You were one of the influences that saved me from buying in Los Angeles,” a reader wrote on the Housing Bubble Casualty blog, which is run by San Diego resident Brooks Hollan. “It was hard not to go with the herd. Your no-nonsense, rational commentary helped me stick to my guns. Thank you!”
Hollan and other commentators are another example of how bloggers are providing alternative sources of information and analysis across a wide spectrum of topics, said Stuart Gabriel, professor of finance and business economics at USC.
Although many real estate pros predicted that the price gains were unsustainable, the bloggers had a special appeal because they could portray themselves as unbiased, he said.
But even as they warned against the perils of easy money and lax loan standards, some bloggers have accepted ads or sponsored links on their sites from lenders.
Killelea, 41, of Menlo Park, said he launched Patrick.net two years ago “because it was so frustrating not to hear the truth as I saw it.”
Killelea, a computer programmer at a large bank, said he became interested in what was driving up prices after he tried to buy a house in 1999 but was outbid several times.
Because he has no financial interest in the industry, Killelea says, he’s more objective about the market.
“There are lots of businesses that make money selling houses, and they don’t want to believe the numbers in front of their eyes,” he said.
Most real estate agents “will always say it’s a great time to buy,” said Adam Rappoport, who reads the blogs and owns a small real estate brokerage in San Diego. Bloggers “see the statistics that we all see, but they interpret them differently,” he said.
Indeed, bloggers routinely accuse professional real estate organizations of misrepresenting data.
“They say stuff that is borderline irresponsible all the time,” said Toscano, a San Diego resident and financial advisor who writes the Professor Piggington blog.
A posting on the Housing Bubble Casualty blog reads, “More nonsense from the Calif. Assn. of Realtors,” next to a picture of an elephant and a big pile of dung. It calls into question the trade organization’s affordability index for first-time buyers.
Leslie Appleton-Young, chief economist with the California Assn. of Realtors, said the group did its best to provide accurate forecasts but no one could foresee the future with any certainty.
And although bloggers might provide valuable information, she said, Realtors deal with questions on a personal basis.
Many bloggers don’t make forecasts, however, but instead question the accuracy of industry groups that they say present overly rosy assessments of the market.
But some bloggers do hand out advice. For the moment, most say, be wary about buying real estate.
Killelea’s main page says it loud and clear: “It’s a terrible time to buy.” He features 47 bullet points disputing common arguments that are used to persuade people to purchase.
Although the forecasters’ gloomy predictions are attracting readers who want a different perspective on the market, they aren’t likely to win them many friends. For example, Hollan, of Housing Bubble Casualty, sees borrowing problems spreading through much of the population.
“With the massive consumption by most Americans being done on credit, look for trouble up ahead,” he wrote. “As bad as it is, the worst is yet to come.”
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