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Mortgage Buyouts Won't Have Instant Impact

Some members of the business media expected the real estate market to react to the government's plan too quickly.
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Did you hear? The government's initiatives to save the real estate industry have failed.

What's that, you ask? Oh, it's only been in the past days or so that the government has even bought up mortgages on a large scale? You mean it was supposed to take more than that?

Well, not according to the

Associated Press

, which ran an article that stands as about as good an example as any of the comically short-term, anecdotal and small-sample-loving nature of the business media.

Considering the government's very recent actions, brace yourself for the headline: "

Real estate market slow to respond to gov't plan


The Business Press Maven is not inclined to think that government hacks of any political stripe can shoot fish in a barrel, let alone save an industry, but even I have to say: Give our incompetent bureaucrats and politicians a break here. There is only one way you can conclude that an impact of the government's action on the real estate market is too slow to emerge, and that's if you were so short-sighted that you assumed an impact would be evident overnight.

And even if you did assume that a recovery should have happened overnight, there would only be one way to assume it had or hadn't: through a ridiculous reliance on anecdotes and the comments of a few far-flung individuals -- a reliance that, unfortunately, characterizes the business media.

Read this lead and weep: "KANSAS CITY, Kansas - By late Saturday afternoon, only three prospective homebuyers had visited the open house Valerie Morrill was hosting. The Prudential real estate agent recalled a year ago, she'd see 10 to 15 people during an open house in this midtown Kansas City neighborhood."

Got that? A real estate agent in Kansas is disappointed. That's the lead evidence for the headline decrying the pace of recovery in light of the government recovery plan unleveled in the past few days. What's worse is that even if you want to pretend that the government efforts should take impact immediately, the lead fails you. The comparison with this real estate should be to a month ago, before all the recent government activity -- not a year ago. How restorative does the business media think immediate-acting government actions should be?

Very. The second sentence features that same Kansas real estate agent decrying the slow pace of nonimmediate change.

More disappointment came in the next sentences. Apparently government-led change to stabilize the real estate market, which had been sent reeling with lending standards that had more holes than a sieve, was supposed to have eased standards by now. And somehow this change was supposed to have simultaneously lowered mortgage rates, despite the many factors that go into mortgage rates in the long run, let alone in a window of days:

"'It's just the buyer pool is so low,' she lamented. 'Eighteen months ago, you needed $500 to buy a house." Now, all the special rates and government programs are gone, leaving buyers facing a 10 percent down payment. 'You have to have money and nobody has money.'

"And there's the rub.

"Despite the Bush administration's historic and head-spinning $700 billion rescue of the financial industry, it will do little to ease lending standards so more homebuyers can qualify for loans, nor has it had much affect on mortgage interest rates so far."

Lest you think that the business media would ever build a canyon-wide conclusion on a sample as narrow as one real estate agent in Kansas, do know that they also manage to speak to one in California, plus a home owner in Florida.

And with that grand sample of three, they are able to go on to a comparative look at the government plan to save Wall Street vs. that to save real estate on Main Street. Apparently, the Wall Street plan is, um, simple, because it's written on three pages:

"On Saturday, Treasury Secretary Henry Paulson outlined a simple plan -- less than three pages -- to restore confidence in the U.S. financial markets. But restoring confidence in the real estate market and among homebuyers appears more complicated."

Well, at any rate, do realize that if you own homebuilders such as

Toll Brothers

(TOL) - Get Free Report


Pulte Homes

(PHM) - Get Free Report


Meritage Homes

(MTH) - Get Free Report



(NVR) - Get Free Report



(HOV) - Get Free Report

, it is more complicated. More complicated than the business media make it seem, at least.

At the time of publication, Fuchs had no positions in any of the stocks mentioned in this column.

Marek Fuchs was a stockbroker for Shearson Lehman Brothers and a money manager before becoming a journalist who wrote The New York Times' "County Lines" column for six years. He also did back-up beat coverage of The New York Knicks for the paper's Sports section for two seasons and covered other professional and collegiate sports. He has contributed frequently to many of the Times' other sections, including National, Metro, Escapes, Style, Real Estate, Arts & Leisure, Travel, Money & Business, Circuits and the Op-Ed Page. For his "Business Press Maven? column on how business and finance are covered by the media, Fuchs was named best business journalist critic in the nation by the Talking Biz website at The University of North Carolina School of Journalism and Mass Communication. Fuchs is a frequent speaker on the business media, in venues ranging from National Public Radio to the annual conference of the Society of American Business Editors and Writers. Fuchs appreciates your feedback;

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