(These ideas are explicated in this sloppy manifesto)

Saturday, December 10, 2005
When did reporters become the gullible stenographers of frauds?

Holy smokes!
The Phoenix region has landed on a list of "extremely" overvalued housing markets
But, but but! Of course there's a "but":
but it's unlikely that the situation will lead to meaningful drops in home prices, several local housing analysts said.
Whew! That was a close one!

Well, not really. The cited text comes from the Arizona Republic, reporting alarmist predictions that are based on no actual, on-the-ground experience that I can detect. The 'researchers,' "Global Insight and National City Corp., a Cleveland-based mortgage lender," couch everything they dare to say in the most mealy-mouthed possible language, for that simple reason that any long-range prediction about a particular real estate market is inherently suspect. Our Cleveland mortgage lenders only dare to make mealy-mouth predictions for--wait for it--"299 metro areas."

When did reporters forget how to make the Bronx Cheer? Isn't that what Hildy Johnson used to do, in The Front Page, when fed a line of bull?

Here's a better question. Assuming the absolute mealy-mouthed worst for the Phoenix market, how bad will things get?
"[W]hen you look back at markets that have declined 10 percent or more over two years, those markets were overvalued by that much or more[.]"
That's choice. What it almost says is that the Valley might be at risk of losing 10% of the current market value of homes over the next two years. That is to say, the house that was worth $145,000 in December of 2003, which is now worth $265,000, may only be worth $238,500 in December of 2007. I'll take bets against that outcome at $100 a head, down to my last dollar. But, even conceding the (unmade) point, the four-year appreciation on the home would be 64%, $93,500 in unearned increment--wealth accrued without having to be produced.

But what the quotation actually says is this: If it turns out that homes have lost 10% of their value over two years, it's because they had been overvalued by 10% or more. Translated into English, it's just stupid. It sounds tautological, but it isn't, actually, because it introduces a false idea of causation.

The value of a thing is what that thing will bring. If people in Phoenix value beer more in Summer than in Winter (they do, by a lot), this doesn't mean the beer was somehow over- or under-valued, in means the value of the beer changes in the subjective evaluation of the buyer depending on the weather. If people in some future time offer less for comparable homes than they had in the past, this doesn't mean they had been over-valued in the past. It simply means they are less highly prized in the subjective evaluation of the buyer at that future time. The only commodity that can be said to be "over-valued" is the one that didn't sell.

There is actually nothing in the article that says Valley home values are going to drop, nor any indication of why they should, could or even might. To his credit, the reporter goes to R. L. Brown and Elliott Pollack for arguments why prices probably will not go down.

He doesn't mention the monthly results reported this week for Las Vegas, a useful leading indicator for Phoenix real estate results. Las Vegas is very similar to Phoenix, a high-growth city which has also undergone a sustained appreciation boom. Like Phoenix, Las Vegas suffered a very small decline in median values in October. For November, Las Vegas home prices were up slightly. We haven't yet seen November's overall median results for the Phoenix market, but the Market-Basket of Homes shows a small increase in values among the subset of Valley homes it tracks.

When did reporters stop vetting the claims made by the sources of their stories? Maybe they never did. Maybe that's just a romantic illusion we got from the movies. Maybe they've always been the doe-eyed stenographers of charlatans and mountebanks, dutifully transcribing the absurd.

In any case, my favorite version of the make-a-scary-prediction-get-a-headline scam comes from KPHO Phoenix Channel 5 News in August:
Schiller predicts housing prices could fall as much as forty percent over the next generation, triggering a recession.
"Generation" is a nebulous term. At a minimum, it indicates the span of time necessary for infants to become parents, call it 20 years. A recession--a nationwide failure of the central banking system--runs 18 months peak to valley and 36 months peak to peak. So prices are going to decline by as much as 40% (a quantification that includes 0% and +200%) over the next 20 years, which could trigger a recession, although we may have to root around to find it somewhere in that 20-year span of time.

How can anyone hear such a blast of flatulence and not say, "Hold on a second there, Perfesser. Are you saying that the population of Phoenix or the United States or the Earth is going to decline? Or are you saying that people are going to start living outdoors? Or is your claim simply that the supply of housing is somehow going to massively and permanently increase by around 40%, abating demand by the same amount? Is there any basis in factual reality whatever for making such an absurd and seemingly undefended claim?"

You can see me asking the same sort of questions of Dr. Jay Butler, who in fact may not be pulling his best headline-grabbing claims out of thin air. But he has not yet responded to my questions--nor, to my knowledge, has anyone else pressed him for the underlying data behind his wilder statements.

While I wait--cum taces, clamas--I have one last question about the state of affairs in Valley real estate journalism:

Where, oh where, is Hildy Johnson when we need him?

BetterVegas: The biggest mass transit sucker of all?

The Las Vegas Review-Journal reports that the sales tax holiday will continue for the Nowhere Train, the Monorail boondoggle the runs behind the parking structures of some of the finest resort/casino/hotels in the world.

The ballyhoo behind the Nowhere Train was "private and profit-making," but more telling than this sales tax holiday are the taxpayer backed bonds that were used to build the Monorail. It burns more cash than it collects, so there is no chance it will repay its own bonds. In due course, Clark County is going to discover a desperate need to buy the Monorail. At the same time, the Regional Transportation Commission is considering a commuter rail system to run on extant heavy rail tracks from Boulder City through Henderson to the I-15 side of the Strip and thence to Downtown. And there's a proposal for a light rail system. Las Vegas could be the biggest mass transit sucker of all: Three useless, incompatible rail systems, each one bleeding the tax-payers white...

Tuesday, December 06, 2005

Jon Talton is the Arizona's Republic's house Socialist. He hates just about everything associated with free enterprise, but he makes up for it by waxing rhapsodic over any stray government boondoggle. He is convinced that Phoenix will continue to go down the toilet by growing and prospering until it dares to mimic all the idiotic urban policies people move here to escape. The Republic runs his column on the business page for the same reason they run articles by effete anti-athletic esthetes on the sports pages. Oh, wait--they don't do that...

In any event, Talton suffers from a rabid moondacity, a desperate need to tell mooney, transparent lies in support of unsupportable stupidities. From the Latin moondax, moondacis, moondacity denotes an incurable condition in which the sufferer's brain has turned into green cheese. It is epidemic in certain circles of Phoenix, particularly in the city government, where the afflicted affect to believe--and attempt to persuade others to believe--that Downtown will be revitalized by the erection of skyscrapers made exclusively from huge stacks of tax-dollars.

Here is a sampling of Moondacity, Talton style:
Maroney's is closing at Central Avenue and Camelback Road, taking away a landmark that has stood since the 1940s. There's a back story, of course: the dry cleaner sits atop contaminated groundwater.
"Closing"--what a failed business does--and "taking away a landmark"--what a tornado does--are not the same thing. This kind of corrupt conflation is constant among the moondacious, so learn to watch out for it. But this is the bigger lie: "the dry cleaner sits atop contaminated groundwater." In fact, Maroney's sits atop groundwater that it contaminated by dumping dry-cleaning chemicals into the ground-table for decades. Even so, the "contaminated groundwater" didn't cause the business to fail. Want to know what did? You can figure it out by inverting the next bout of moondacity:
Viacom, which owns the property and its lucrative billboards, is working with the Arizona Department of Environmental Quality to clean up the site. So this is hardly a business closing that can be blamed on the coming of light rail.
Did you catch it? When Talton says, "this is hardly a business closing that can be blamed on the coming of light rail," he's telling us with all the veracity the moondacious can muster that the cause of Maroney's failing is the coming of light rail. Talton came right out and told you the lie, so you know it's true.

Is this so hard to foresee? Camelback and Central is fairly densely populated by Phoenix standards, but not by any standard that would apply Back East. All of Maroney's business is drive-up. Not walk-up. Not take-the-bus-to-and-fro. You drive up. You park. You drop off or pick up your clothes. You drive away. Drive-up traffic at that intersection will be substantially more difficult after the trolley is finished. As it happens, it's virtually impossible right now, as the trolley is being built. From Camelback to Campbell, Central Avenue is almost impassable. What killed Maroney's? Light rail.

Talton has the gall to wonder if Phoenix might fail to benefit from transit-oriented development--which forbids the establishment of any new drive-up businesses in the swath of the trolley. In the minds of the moondacious, it's completely plausible that people will take the trolley to the dry-cleaners, then hop on another trolley to go on to work. That may not seem reasonable to you, but you forget that, once the light-rail is completed, summer high temperatures will never hit the high seventies and all the bums will be coiffed and perfumed. Oh, wait--that's just in the ValleyMetro brochures...

But not even ValleyMetro can top Talton for bald-faced moondacity. Contaminated groundwater has nothing to do with anything. It's been there for decades, and nobody's drinking that water in any case. The trolley is killing long-established businesses up and down its route, and the green-cheese-heads who inflicted it on us, along with all the other doomed Downtown 'investments,' don't dare admit this and dozens of other obvious truths. They use Soviet-style propaganda to afflict us with Soviet-style 'improvements.'

The next step in the game will be to plead with you to go out of your way to 'support' the businesses that are nope-no-way-uh-uh-never not being hurt by trolley construction. And that is propaganda perfection, Soviet-style, to tell two self-contradicting lies in one moondacious exhortation, challenging you--on pain of being declared a counter-revolutionary wrecker--to question anything you are told.

Phoenix can survive Jon Talton, as odious as he is. And we will overcome the stupid mistakes of the moondacious green-cheese-heads Downtown. But I'm not sure that any good thing can thrive in a place where public discourse consists of nothing but lies, and where anyone who dares to whisper the truth is shouted down and, in then end, self-censored.