The Sacramento Real Estate Market Killed My Father
Hello, my name is Inigo Montoya. You killed my father. Prepare to die.
This is a tale about blaming the real estate market for whatever else is wrong.
This is also a tale about a bit of ugly sheudenfreude on my part. The other day I was reading Sacramento News and Review, and there was an article in there about the Sacramento Bee’s stock prices. While the average Sacramento County home owner’s investment lost 20-30% of its value over the last two years (1st chart, below), the average investor in McClatchy Stock (Sac Bee’s parent company), saw the value of their investment fall 75% (second chart, below).
Normally I’d feel bad for the folks over at the Bee — or at least, I might feel neutral. But I have to admit, coming on the heels of these folks babbling every other day about the “housing crisis” and “mortgage meltdown” for the last two years, I didn’t feel a heck of a lot of sympathy. If a guy who invests a dollar ends up with 75 cents, and that is a “meltdown”, what word might be appropriate for a guy who invests a dollar and ends up with a quarter? Catastrophe? Unmitigated disaster? How about THE END OF LIFE AS WE KNOW IT!
But wait — The Sacramento Bee has identified the culprit here. You see, the mortgage meltdown and the END OF LIFE AS WE KNOW IT at McClatchy aren’t unrelated — it’s the housing market’s fault that the Sacramento Bee’s stock is in the toilet!
Explaining the downturn in July, the Sacramento Bee’s Dale Kasler wrote:
“The downturn mainly reflected a significant drop in ad sales, especially at McClatchy’s California and Florida papers. Nearly three-quarters of the drop in ad revenue came from those two states, which are suffering from real estate woes. Real estate advertising was down 32 percent in California and Florida, causing a spillover effect that depressed other ad categories.”
Wow, really? That’s quite a meltdown indeed, if now we’re causing a “spillover effect” that’s depressing other ad categories. How does that work, exactly? I suppose the sales manager at Folsom Lake Ford said to himself, “Well, hmm, the houses aren’t selling that well any more — no point in advertising the new Explorers this week. Let’s pull the ad.”
Spillover effect. OK I’ll bite, let’s discuss spillover, shall we? With houses harder to sell, not easier, you might expect that instead of spending less on real estate advertising, we might end up spending more. Then again, maybe your former advertisers didn’t like the fact that your constant use of terms like “Meltdown” and “Crisis” is scaring the buyers off day in and day out, while prices are better than they’ve been from a buyer’s point of view in two years and interest is still quite low.
“My name is Inigo Montoya, Sacramento Bee Staff Writer. My yellow journalism killed my stock prices. Prepare to watch me blame the housing market — again!”
By the way, if there are any Sac Bee readers out there who are still wondering, JFK was not killed by Adjustable Rate Mortgages resetting.
