Is it a housing bubble or just another rhetorical question?

bubblesHarry Truman supposedly longed for a one-handed economist. As he pointed out, “All my economists say, ‘on the one hand . . . on the other . . .’ ”

When the title of an article is a rhetorical question, I long for a one-handed reporter.

I know there’s a real issue here. When a reporter finds evidence on both sides of an issue, what should she do? I sympathize — the world is complex — but I’d like my journalists to do what I did as an analyst: dig a little deeper, reveal factors and truths that aren’t obvious. The alternative is to write a rhetorical question piece. In other words: “On the one hand . . . on the other hand.”

On this topic, I just read “Is Boston area on its way to another housing bubble?” by Dierdre Fernandes, Boston Globe, 7 April. Fernandes isn’t sure, and after reading the article, neither am I. I’ll highlight the uncertainty in the excerpts.

On the one hand:

A recent report by a Florida property valuation firm suggests that Massachusetts is among the places — 13 states and the District of Columbia — where home prices are rising far faster than the cost of building or renting a home. The widening gap could be an early warning sign that the state is creeping back into another bubble, said David Macpherson, an economist with Smithfield & Wainwright . . . “It’s not back to where they were in 2006,” said Macpherson, referring to the peak nationally of the last housing boom, “but it’s starting to show the early signs of it.”

This could be a formula for another housing crash, similar to what hit a decade ago, when lenders agreed to mortgages that were far higher than what the properties were worth or what homeowners could afford, Macpherson said.

On the other hand:

“There’s still room to grow,” [Timothy Warren, CEO of Warren Group] said. “Maybe there are bubbles in some of those communities. On a statewide basis, I don’t think there is any risk of a bubble.”

“People are making smarter decisions in terms of finding the right mortgage products,” [realtor Rachel Hillman] said. “People are living within their means.”

David M. Blitzer, managing director of the index committee at S&P Dow Jones Indices, . . . said if the Boston area’s housing rebound continues at this pace, prices could hit new highs later this year.

Luckily, we now have comments on news articles. The commenters asked some questions I wish the reporter had asked:

Why would any reporter quote a Realtor ™ in an article analyzing the housing market?

The article . . . does have some gaps. It biggest flaws are the failure to note that the Fed will likely raise interest rates in the not to distant future . . .

The [graphic of home prices in Somerville] is not representative of the general market because of its unique escalation due to the proposed Green Line Extension.

I’m not advocating that reporters must decide undecidable questions (that’s what the editorial page is for). The definition of a bubble is that people in it don’t know it’s a bubble. Present both sides, but all the “coulds” and “mights” don’t reveal anything. Tell me something I don’t know, please. Give me some context I can’t get from the local real estate agent. (And that answers the rhetorical question I posed in the third paragraph of this post.)

Lesson: Beware the rhetorical question backed up with wishy-washy quotes. If a reporter raises it, she must either answer it herself, or provide us enough information that we can make an intelligent decision.

What’s missing: Context.

Could you say it shorter? Leaving out the waffling and you’re left with this:

House prices are rising faster than rents or replacement costs in Boston. Smithfield & Wainwright says this is a sign of a bubble. Nobody else is sure, but remember, no one can see a bubble from the inside.

I need your help. Send me the bullshit you deal with every day. I’ll show ’em.

 Photo by Charlie Reece via Flickr

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