Mortgage crisis no surprise to 'Housing Bubble Blog' community

Living in Southern California, I’ve been watching home prices explode over the past six years. My wife and I once wondered how people that we knew were making far less than we were could afford to buy homes for many hundreds of thousands of dollars more than traditional “home affordability” calculators said that we could afford.

We found the answer, of course, online. Lenders had abandoned traditional guidelines for mortgage lending, creating interest-only, negative amortization, no-money-down and “teaser rate” loans, which allowed people to get into homes far more expensive than a traditional fixed-rate mortgage with hefty down payment would have allowed them to buy.

When all this easy money poured into the market, the predictable price inflation allowed lenders to justify expanding the market to sub-prime buyers — anyone with a pulse, really — since inflating home values would allow any buyer, even one not even paying the accumulating interest on their loan, to build thousands of dollars in new equity each year.

For the past three years, Ben Jones’ Housing Bubble Blog has provided an online home for skeptics who knew that this bubble could not last. Several times a day, Jones posts from his northern Arizona home a round-up of real estate news from newspaper and television websites, to which a virtual army of loyal readers responds with comments and observations about their local real estate markets.

Jones’ blog provides another point of evidence for the assertion that there is a blog well covering every issue online. Readers of Jones’ blog saw the crash coming, before it happened. Many have posted emotional “thank you”s to the blog, detailing how reading the blog convinced them not to buy, while friends and family members took on option ARMs and other non-traditional loans, only to face foreclosure and bankruptcy today.

Like many successful blogs, the HBB includes reader comments that might make traditional news editors uncomfortable. One can find plenty of racism, xenophobia, vindictiveness and gloating within HBB readers’ posts. But one also can find hard data and well-documented research that skewers the frequently unchallenged quotes from sources in newspapers’ real estate reports. Above all, an HBB reader encounters passion — raw emotion that is too often missing from dry, robotic real estate reporting in the traditional press.

I swapped e-mails with Jones last week, asking him about his blog and what it lessons other news reporters could learn from it.

OJR: Please describe the Housing Bubble Blog and tell us when — and why — you started it.

Jones: It is a blog where I aggregate housing bubble news and edit it for context. I first put together posts on the housing bubble in November 2004. I started my first blog dedicated to the subject in December 2004. I did that because I didn’t feel the press was giving the matter the attention it deserved, considering the risks involved.

The comments from readership are a major part of this blog. Many return frequently and we all have gotten to know a lot about each other. Posters bring their individual perspective and knowledge to the group, making it a very rich and interesting view of the subject at hand. I use, or make a place for, a good deal of reader-generated subject matter, which has become as popular as any material I find and post.

OJR: How many people read the blog on a typical day?

Jones: On a weekday, the software tells me 40-50,000 unique viewers.

OJR: How did you build that audience?

Jones: With years of hard work, consistency and attention to the needs of a potential poster at any point in the day. Plus most are returning to interact with the group itself, so I get out of their way and let them at it.

OJR: Much of the content on HBB comes from reader comments. Are you happy with the quantity and quality of comments you get on HBB? (If not, what would you like to do about that?)

Jones: It has really grown in the past two years. Comments are two- to ten-times my word counts on any given thread. I couldn’t be happier with the folks that hang out on my blogs. Obviously, they are a bright group and they attract similar posters and lurkers.

Sometimes, when the number of comments gets up over three hundred, it loses a bit of readability, but that’s alright because by then I have something new up, usually.

OJR: What would you tell other bloggers and online publishers to do to help build robust and useful comment sections on their sites?

Jones: Like most of these questions, this is addressed more completely in the book I am working on and hope to have published next year. I consider facilitating comment flow to be the single most important thing I do. A lot goes into that, from subject matter, timing, software and the manual moderation effort.

I also adopted a sort of hands off approach early on. I do the posts, they do the comments. I treat the posters as adults, and I prefer to let them sort out their own differences. Sometimes this causes a thread to turn into a train-wreck, but overall it has served me well.

OJR: What is your “day job”? How much income does HBB bring in, relative to your other income?

Jones: I am a full-time blogger. It pays my bills and obviously I continue to do it because I want to. But I could be making more money doing other things, so it is a labor of love.

OJR: How long do you see yourself running HBB?

Jones: I feel a responsibility to the readership to see this thing through to a logical end. I look forward to the day when housing prices aren’t a big issue anymore.

OJR: Do you think that HBB can become a long-running, self-supporting publishing business?

Jones: I think it already has.

OJR: What do you think of the job that journalists working for major newspapers and TV have done covering real estate over the past decade?

Jones: Like many of the checks and balances surrounding the housing price boom, the media failed the public to a large degree. Having done some writing, I am well aware that journalist don’t have a final say on what gets covered and how. And having done many interviews, I can say that most journalists I have interacted with are very level-headed and practical about economic matters in private.

In my opinion, the biggest failure of the press regarding the housing bubble in 2004-2006 was a lack of objectivity and ‘professional skepticism,’ as we called it in my auditing classes. Over and over, the print or Web media would turn to a trade group for analysis of some new statistic.

This was often the case when this same organization provided the data. These people are paid to provide a slant to the news, yet they were interviewed as an unbiased observer, and their answers were rarely challenged in those years.

For example, in the spring of 2005, the Realtors’ trade group reported some very high percentages of speculative and second-home purchases for the year 2004. At first they were a little taken aback. But within a few days they had regrouped and created several new theories to explain this disturbing data. We were told; baby boomers were going to own many homes, and people are speculating because it is a new investment class. Also there was the ongoing ‘shortage of land’ mantra the industry made up. And we were told, that September 11th had made the nation feel differently about housing; some sort of comfort aid.

All new paradigm stuff and all made up after the fact to explain away some trends that we now know to be the source of many industry ills.

If I could see this from my humble desk in Arizona, why didn’t the media pick up on it? They weren’t skeptical enough when it counted. And this is just one example of hundreds.

OJR: Given your experience with HBB, what advice would you give these “mainstream” journalists on how better to cover real estate?

Jones: As the bubble was topping out, I often saw reporters mention seeing a glass half-empty or half-full. I don’t think that has a place in financial journalism. And being objective means being skeptical, in my opinion. When someone says, ‘I think the market will turn around this spring,’ it should be followed up with, ‘what is the basis for that prediction?’ And saying, ‘because it always has’ isn’t good enough. As the last two springs have demonstrated, sometimes it doesn’t.