Housing’s virtuous circle

October 26, 2012
Housing market showing a single home

As an editor of one of the nation’s largest business publications covering home building, I’m frequently asked about the state of the housing market. Everyone from regional builders and product manufacturers to consultants and architects will ask: “What are you hearing from builders?” “Are we officially in a housing recovery?” “When will the market get back to peak levels?”

Instead of citing the latest Case-Shiller index or new-home sales numbers from the Census Bureau, I almost always turn to a much more subjective, but infinitely more powerful indicator — national media coverage of the housing market. Say what you will about the media and the state of journalism in America, but there’s no denying the power the national media hold on the collective psyche of American consumers.

Typical Americans are not paying close attention to the monthly housing metrics, but they are hearing (whether they like it or not) the general dialogue taking place on network and cable TV news programs, radio talk shows, and online news sources. And the good news for builders is the national dialogue on housing has turned largely positive in the past 12 to 15 months. This, in turn, has made the average American feel a little bit better about the housing market and perhaps their housing situation. 

The rather drastic swing from mostly negative reporting on housing to mostly positive is no fluke, nor is it a conspiracy by the government. It’s the result of a build-up of enough upward-looking housing market reports to signal a trend. The media simply serves as the conduit to consumers.

This phenomenon of positive news begetting positive news is known in economics terms as a “virtuous circle.” Researchers at the Wharton School of the University of Pennsylvania recently penned an interesting piece on housing entering a virtuous circle (read the article at http://tinyurl.com/VirtuousCircle). In it, Wharton real-estate professor Susan Wachter predicted that rising home prices will encourage more potential buyers to purchase a property before prices rise further. And that bump in demand will move prices even higher, which will, in turn, attract more buyers. It’s this positive momentum that will ensure a sustained housing market comeback, Wachter said. “It’s for real. This is absolutely for real.”

Sure, the housing market — and the overall economy — has a long way to go. But if Wachter’s call of a virtuous circle holds true, the grassroots recovery occurring this year  has the potential to quickly snowball into an all-out national comeback.

I’d like to get your take on the topic. What are you hearing from your potential buyers? Send me an email at the below address.

David Barista is editorial director of Building Design+Construction and BDCnetwork.com, properties that combined reach more than 100,000 commercial building professionals, including architects, engineers, contractors, and building owners. He has covered the U.S. construction industry for more than a decade, previously serving as editor-in-chief of BD+C, Professional BuilderCustom Builder, and HousingZone.com, covering the U.S. construction industry for more than a decade.