The Enormous Divide Between the Headline and the Truth

“I have observed that not the man who hopes whenothers despair, but the man who despairs when others hope, isadmired by a large class of persons as asage.” – John Stuart Mill (1840s)

Even back in the mid-1800s, people knew that negative newssells. That is still true today. All forms of media realize thatthey will get more eyeballs, clicks, likes, and engagement byposting something negative. However, they must realize thatnegative headlines impact markets.

Just last week, the National Association of HomeBuilders released a survey revealing:

“Negative media reports making buyers cautious was asignificant problem for 48% of builders in 2018, but 62% expect itto be a problem in 2019.”

Even today, good news is headlined with a negative spin in orderto get attention. Here are two recent examples from mainstreammedia:

Actual Headline #1: Cash-out refisare back – will homes become ATMs again?

The real story: The headline is accurate– to a point. It is true that the percentage ofrefinances in which the homeowner received cash at theclosing has increased to levels that existed in 2006. However, theactual amount of equity homeowners “cashed-out”compared to a decade ago isn’t close.

The dollar amount cashed-out last year was $63billion. That seems like a really large number until we compareit to 2006, when homeowners cashed-out $321 billion. Thatis more than five times the current amount.

In 2006, people did use their homes as ATMs. They purchased newcars, boats, and lavish vacations. Today, the cashed-out equity isbeing used to consolidate debt, as seed capital for a new business,or to help a child with their college tuition.

Actual Headline: Consumer Debt hits $4 Trillion. Americans are diving deeper and deeper into debt.

The real story: The first sentence of theheadline is accurate. The second sentence couldn’t be furtherfrom the truth. Total consumer debt is the highest it has everbeen. That’s because the population continues to grow, and sodoes the economy (prices and wages).

The important number is how that total debt ranks as a percentage ofdisposable personal income. That percentage is thelowest ever recorded!! People arenot “diving deeper and deeper intodebt”. The exact opposite is true. They have lessdebt now than ever before.

Bottom Line

If you are thinking about buying or selling a home, it isimportant that you have a true professional handling your realestate needs. Someone who knows the truth about the current economyand its potential impact on the housing market.