The Housing Market's Great! (Or So Say Ads From Realtors)

Category Jacks Outlay by 20.3% to Dispel 'Myth' That It's a Bad Time to Buy

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Why Pay an Agent When You Can Go Online?
"It's a great time to buy or sell a home," declared a print ad that ran in dozens of major national newspapers late last year from the National Association of Realtors.

Six months later, though, that rosy, upbeat message contrasts starkly with the facts: 2006 was the worst real-estate market in five years. Sales dropped 8.4%, and home prices rose a meager 1.1%, according to data from the association's own research arm.

No problem here: A print ad from the National Association of Realtors paints a rosy picture of the market.

See Chart:

Bad Year
After a Decade of Growth, Home Sales Dropped in '06

Yet in TV spots for the NAR launching nationwide, an earnest Realtor implores: "It's a great move-up market" and "This is the best market in years [long pause] ... in terms of choice." Then there's the ecstatic couple ensconced on comfy couches with two smiling toddlers: "When you have a family, it's always a good time to buy."

The hope, of course, is for the industry to advertise itself out of a down market and save the economy from a housing bust.
But will consumers buy it?

More ad spending at market downturn
Other categories might cut advertising spending when times are tough, but real-estate outlays jumped 20.3% to $3.1 billion in 2006. NAR alone will spend 60% more, or $40 million, this year according to Frank Sibley, senior VP-communications and conventions and manager of the campaign, handled by Most, Newport Beach, Calif.

The association's 1.3 million members voted to up dues $5 to $30 to fund the increase, and Mr. Sibley said the campaign has been extended to 11 months from seven months. "If we ask members, 98% want us to do more advertising."

But spending more won't help, according to Brad Inman, an industry pundit who founded a real-estate-news service that bears his name. Realtors "are trying to counteract that tipping of consumer confidence," he said. "None of those ad campaigns is going to counteract a bad market."
Frank Sibley, senior VP-communications and manager of NAR's most recent ad campaign
Frank Sibley, senior VP-communications and manager of NAR's most recent ad campaign

As a trade association, "A lot of what [the NAR does] is to please its members as opposed to doing what is really going to persuade the public," Mr. Inman added.

Positive awareness
NAR's latest push is a sharp departure from its "public-awareness campaign" launched amid a 1996 real-estate boom to create more positive awareness and preference among consumers for Realtors vs. licensed agents. "We wanted to be viewed more like doctors and teachers, and a lot less like bankers and lawyers," Mr. Sibley said. (Nationally, there are 2.6 million agents, but only about 1.3 million are NAR members. The others are licensed agents.)

But the directional change is needed, said Mr. Sibley, as the NAR wages a battle for public perception. "There was a lot of negative publicity in the media, so we wanted to counteract that," he said.

"The financial media creates issues to try and make people uncomfortable about investing in real estate and more comfortable about investing in equities. If you read Forbes, Fortune or the business sections of major newspapers, they would tend to argue if you have money to invest you should put it in equities -- that would be a better choice than in real estate, so their national coverage tends to reflect that inclination and they come up with things like there is a [housing] bubble."

Wrote Century 21 CEO Tom Kunz in Real Estate Magazine in late 2006: "It's our responsibility to dispel the myth of doom and gloom, and replace the media's rhetoric with some cold hard facts."

NAR is especially sensitive to accusations of cheerleading these days. Its chief economist, David Lereah, extensively quoted throughout the housing boom in the financial and mainstream media, stepped down one day before the organization released another round of bad numbers May 1; it reported an 11.3% drop in existing-home sales in March, compared to last March. It is the biggest drop in 18 years.

Bloggers went nuts, and even personal-finance website Motley Fool weighed in about how Mr. Lereah "consistently told the press that all was well. I still have no idea how self-respecting business journalists anywhere could have parroted his biased misinformation for so long."

But spin is clearly part of marketing. In sending its latest data to Ad Age, Walter Moloney, NAR's head of public affairs, offered caveats and lengthy explanations of why today's slump differs from the last two housing downturns.

It gets worse ...
Yet more bad news looms: 2 million homeowners could soon go into foreclosures. March foreclosures soared a shocking 47% to almost 150,000, compared to the same time last year, according to RealtyTrac. At the end of 2006, more homes than ever were sitting vacant -- 16.7 million out of 126.6 homes nationwide, according to the most recent figures from the U.S. Census Bureau.
Bev Thorne, senior VP-marketing at Century 21
Bev Thorne, senior VP-marketing at Century 21

The National Association of Realtors isn't the only advertiser in the category to gloss over industry woes. "There is a lot of bad news, but this is still the second- or third-strongest year historically over the past 30 to 40 years, and it is still a very strong, vibrant market," said Bev Thorne, senior VP-marketing at Century 21.

But that's tempered by a dose of realism. Despite the spending increase for the entire category, Century 21 did not raise its budget in 2006. The brand's overall spending declined 6% to $79.5 million, according TNS Media Intelligence.

Exercising caution
Charlie Young, senior VP-marketing at Coldwell Banker, said the brand's spending will be flat in 2007. Additionally, the brand is being careful not to give the appearance of cheerleading.

"You have to remain credible," he said. "It's a very traditional response to say, 'Hey, it's a buyer's market.' But for us, on a national brand level, that's not the strategy we've chosen to take."

That's a smart move, according to Tom Davidoff, a professor of housing economics at the University of California at Berkley. He said in a down real-estate market, advertising should stick to the realistic goal of winning share.

"I don't think, in the aggregate, the amount of advertising on TV is going to make the slightest bit of difference," Mr. Davidoff said. "I don't think anyone ... sees an ad for Century 21 and says to themselves, 'I should go put my house for sale."
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