Monday, March 04, 2013

Businessweek's controversial cover and the real estate article it overhypes

Erik Loomis thinks the cover of the Bloomberg Businessweek print edition for 02/26 to 03-03/2013 looks like a racist caricature (The Past and the Future LGM 02/28/2013). I agree:

Matthew Yglesias also notes it in Businessweek Warns That Minorities May Be Buying Houses Again Slate 02/28/2013 and quotes a response from the magazine, which he characterizes as "a pretty categorical non-apology" apology, i.e., one in the form of, I apoogize if any of you silly people were offended. Yglesias follows up with a commentary on a further clarification from BW (The Context for Businessweek's Housing Cover Slate 02/28/2013), one which sounds like a stretch to me.

See also: Jason Linkins, Bloomberg Businessweek Goes Racist-Chic For Housing Bubble Cover Huffington Post 02/28/2013

It seems to me that Businessweek has been looking hard for a housing rebound for a while.

The online version of the article with the unpleasant cover is A Phoenix Housing Boom Forms, in Hint of U.S. Recovery by Susan Berfield 02/21/2013. The article doesn't quite match the hype of the cover blurb, "Flips. No-look bids. 300 percent returns. What could possibly go wrong?"

The report itself focuses on the housing recovery beginning in the Phoenix area after a severe downturn. For instance, Berfield reports on the homebuilding company PulteGroup, which is active in Phoenix:

Pulte is the largest homebuilder in the U.S. by market value and, like most builders, had a very good year. Its revenue was $4.8 billion in 2012, with a profit of $206 million. That’s well below the $1.4 billion it earned in 2005 but far above its $2.3 billion loss in 2007. Last year, Pulte was the best-performing stock in the Standard & Poor’s 500-stock index, nearly tripling in value. ...

Richard Dugas, the chief executive officer of Pulte, sees opportunities in "the Southwest, the Northeast, parts of California, Florida, Las Vegas. We’re optimistic." Nowhere is that optimism about a recovery more palpable than in Phoenix, which has always been as much a bellwether of national fortunes as a place to live. Tempered by painful memories of the bust, the area’s buyers, sellers, builders, and investors are coming back into the market warily—but they’re coming back.
Housing developers always see opportunities, so that's not exactly news. For PulteGroup, what the report describes is a slow comeback from a severe slump:

Pulte is much smaller than it was in 2005. During the downturn, the company laid off 80 percent of its workforce and built 66 percent fewer homes. Even among homebuilders, Pulte was known for its aggressive land purchases. "People would have said we were obsessed," says Dugas. Since 2005, Pulte has reduced the number of lots it controls from 380,000 to 120,000.
Berfield also reports that real estate sales people are optimistic about the Pheonix market. Wow, optimistic real estate agents, what a surprising phenomenon!

There are some signs of a modest housing recovery showing up in the national economic data. Jeanna Smialek reports in Krugman Says Fed Low Rates Key to Housing Rebound: Tom Keene Bloomberg News 02/15/2013. From Bloomberg Surveillance 02/15/2013:

But the new runaway housing bubble that the Businessweek cover picture and blurb would lead the unwary reader into believing was starting up isn't really in evidence in the article itself.

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