But none of that stopped the National Association of Realtors promulgating a $40 million ad campaign urging Americans to think of buying a house as a get-rich opportunity.
Ads include claims that, on average, the value of a home nearly doubles every 10 years, and 60% of the average homeowner's wealth comes from home equity.
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The campaign features two spots, "Open House" and "Moving In." In one, a woman who appears to be a real-estate agent walks through a well-appointed home declaring that home-buying "opportunities have never been better." For those "on the fence" about buying a house, the National Association of Realtors "wants you to know that a home isn't just a great place to raise a family; it's also the key to building long-term wealth," she says.
In the second spot, which shows a family carrying boxes from a van into a house, the agent says that those who have bought a home are "making a good move for your family and toward building long-term wealth." Ads include claims that, on average, the value of a home nearly doubles every 10 years, and 60% of the average homeowner's wealth comes from home equity. The ads drive viewers to the website, HousingMarketFacts.com.
On the site, an "equity estimator calculator" suggests a $20,000 home down payment turns into $124,600 in 10 years for a 623% return. The website includes the same claims as the two spots and adds a few more noting, for example, that that prices have risen an average of 6% every year. Like each of the spots, the site does come with a small warning -- that local market conditions can vary and consumers should seek counsel from a local real-estate agent.
However, in the light of the current market the "housing-market facts" could also be read as a historical look at an overheated market rather than a good predictor of what's to come. Gary S. Becker, a Nobel Laureate, author and economic professor at the University of Chicago, said the ads leave out important information that consumers need about home ownership. "It's a risky investment -- unless borrowers recognize that, they could be misled," he said.
Mory Brenner, a veteran consumer-debtor attorney who now writes on debt issues from a consumer point of view, put it this way: "Were the ads trying to lead you down a road with blinders on? I thought so. I found it objectionable and a little offensive," he said. While without patently false statements or data, Mr. Brenner said the ads "are misleading and not especially forthright and, in a way, the way we got into this situation [the subprime-mortgage crisis] in the first place." He chided the association for not producing a campaign more befitting its station. "They're not some [real-estate agent] on the corner," he said.
Betting the farm
Others were concerned about the premise the Realtors put forth in the ads that housing values are going up. Patrick Newport, an economist with Global Insight, an economic-forecasting firm, said: "In a lot of markets, housing prices are dropping, and in some markets -- such as Florida and California -- they are dropping a lot. If you buy a home, you take on a big risk," especially if national housing prices drop 10%, as some predict, or if you lose your job and are unable to make mortgage payments, he said. He added that in many cases, "renting may be a much better deal than buying a house."
Greg Daugherty, executive editor, Consumer Reports, said he understood that the Realtors are trying to make their case to stimulate business for their members. But "generally speaking, we don't think people should look on their house as an investment," he said. "Even if you double your money over 10 years, it's not a huge return compared to the stock market," he said, citing Consumer Reports studies that back up that point. "If you need a home, it's always a reasonable time to buy one. But consumers should not look at buying a home as a get-rich-quick, or a get-rich-ever, scheme," Mr. Daugherty said.
Jeff Lancaster, a wealth-management adviser in San Francisco and Silicon Valley, said the ads are sweeping some important facts under the rug. "I don't think, in general, advising people today to buy homes for financial reasons is good advice. There's very good reason to believe the price of residential housing in most communities in this country will be lower a year from now than it is today," he said. "You could lose money."
Mr. Lancaster, a principal in Bingham, Osborn & Scarborough, also noted some practical problems with the wealth-growth claim: As soon as a home appreciates in value, the bank holding the mortgage starts an ad blitz for a home-equity line of credit, oftentimes leading consumers to spend that money. "We know a lot of homeowners are not responsible because they've been encouraged [to be less than fiscally responsible] by their bank," he said.
Mr. Lancaster, Mr. Becker and other critics of the commercials thought the association should give some thought to placing a warning in the ads similar to those for pharmaceuticals or financial-investment companies, or a responsibility message similar to those from beer and alcoholic-beverage companies.
But a National Association of Realtors spokeswoman said the ads don't need any disclaimers. They emphasize the growth will come "over time" and advise consumers to consider local markets and seek advice from a real-estate agent. "They're there to help," she said, adding the organization also can find houses to rent.
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