My column in this week’s Greenwich Sentinel was about the media’s need to sensationalize bad news about the Greenwich real estate market and the selective fact selection the authors use to support their premise. You can read the article below with links to the Wall Street Journal and ZeroHedge articles mentioned. The Sentinel posted it on their website here. They also wrote an excellent editorial on what I called day-glo journalism and the history of yellow journalism
If you want to hear what is really going on in the Greenwich real estate market, Carolyn Anderson, Paul Pugliese and I are talking about the north Greenwich market at the Round Hill Association annual meeting on Wednesday May 1st starting at 6:30 for the reception and probably around 7:00 for the presentation.
[Article as it appeared in the Greenwich Sentinel plus links]
The Devolution of News and the Bashing of Greenwich
Last week the Wall Street Journal ran a story entitled: Wealthy Greenwich Home Sellers Give In to Market Realities. It had a lot of inflammatory comments and “facts” all woven together to leave the impression, as one financial website dubbed their paraphrase of the article, that The Greenwich Housing Market Is Imploding.
Let’s take a look at exactly how yellow journalism’s modern incantation, what I call “day-glo” journalism, works.
The idea behind day-glo journalism is to take an overstated idea (such as, in the case of the WSJ article: a single real estate auction is an indication of the “never-ending slump” in Greenwich real estate) and create a story from it that will get a lot of clicks and shares and re-tweets, which are the new standards for a career advancing article.
Day-glo journalism hijacks this story right from the opening sentence: “After four years on the market, and three price cuts, a stately Colonial-style home on Greenwich, Conn.’s tony Round Hill Road is being sold in a way that was once unthinkable in one of the country’s most affluent communities: It is getting auctioned off.”
To day-glo the news in an article you need to normalize the extreme, so it begins by making four years seem like the norm. Four years on the market is a long time; it’s 1,460 days. Nowhere in the article does it indicate that this number of days on market would mean it was the 8th longest house listing on the GMLS out of 669 listings. Our median days on market is only 172.
Next, the article says auctions were once unthinkable in one of the country’s most affluent suburbs, but that idea is not attributed to anyone. What has happened in Greenwich is that a number of companies have tried to get into the business of auctioning houses, but in general, these auctions have not resulted in money in the owner’s pockets and there have only been a handful of them attempted.
It is not that they are unthinkable but rather that they are simply ineffective. To my way of thinking, we don’t see more auctions here because they don’t work well in Greenwich, since bidders don’t tend to show up. We did have one “successful” auction where a house listed for $7.25 million sold for $4.48 million, but that hasn’t encouraged many sellers to try auctions.
In day-glo journalism unsubstantiated statements are taken as fact, such as this one, “Many wealthy New Yorkers are opting to live in the city, rather than in the suburbs.” Really? How many is “many” and from what source are they getting this information? How do they know that? The simple answer is they don’t know.
In a clever sleight of hand, the article throws in: “The seemingly never-ending slump is leading some sellers to accept less—sometimes a lot less. Owners who paid top dollar for their homes in the Fairfield County town in the mid- to late-2000s are routinely selling for less than they paid.”
There was a bubble that peaked around 2007, but to refer what has happened since as a “never-ending slump” is simply inaccurate. Many houses on the waterfront and in other areas are actually up in value, particularly those bought in 2009, but that sort of distinction would slow the narrative and ruin the day-glo. Also, our sales were up in 2018 over 2017, but that is also not mentioned in the story.
In day-glo journalism, many inconvenient numbers that don’t support the more salacious narrative of a “never-ending slump” won’t appear in the article. This happens in part because most reporters in today’s 24-hour news cycle and shrinking print circulation are under immense pressure to get the story and move on to the next story. When I have called reporters about articles (although I have not had a chance to talk to the reporter of this particular story), they often say they weren’t aware of the other numbers. Once I called a Vanity Fair writer who had grossly overstated the unsold inventory in Greenwich and her defense was that the “gist” of the story was correct. Unfortunately, the advent of high-pressure “online journalism” allows for just about anything to be posted and for contradictory information (information that doesn’t support the narrative) to just get ignored.
Another favorite ploy is reporting statistical changes without context. For example, “The median price for a home in Greenwich dropped by 16.7% last year to $1.5 million in the fourth quarter of 2018, according to a recent report by brokerage Douglas Elliman.”
While this statistic is mathematically correct, these changes in the median price are often used to demonstrate that all houses in Greenwich dropped in value, and that’s not accurate. A more thorough investigation of the numbers shows clearly that the change in the median price was due to 1) a big jump in sales of lower priced home sales combined with 2) a small decline in higher priced home sales. Sales of homes from $800,000 to $1,000,000 jumped 60% while sales from $5 – 10 million saw a small decline. Therefore, higher sales below the median price and lower sales above the median caused the median to decrease, but not because there was a general drop in Greenwich house values.
But why Greenwich? You don’t see Darien or New Canaan getting this kind of attention. Greenwich is well known and articles about Greenwich get lots of clicks. Several years ago, I put up a blog post about a drop in high-end sales, which got picked up by the WSJ real estate blog, then by a Bloomberg reporter and then by Bloomberg TV. The Bloomberg reporter told me that the print story was the number two story world-wide on the Bloomberg terminals that month. The only other story that got more attention, according to her, was a story about a Berlin hedge fund that gave their top people a weekend at a German brothel (where prostitution is legal).
I was told this over a very nice lunch at L’Escale, paid for by Bloomberg. The reporter said her editor would welcome more stories about Greenwich. The negative stories got attention, while the good news stories were mostly concentrated on who were the purchasers and sellers of $10M+ houses in Greenwich.
People just can’t seem to get enough stories about wealthy people getting their comeuppance. Writers who want to move up in this world of blogs and instantly measured click-throughs have a much easier job of it if they write a negative article, keep the narrative simple, and are willing to ignore contradictory facts.
When a major publication does this, lots of folks want to jump on the bandwagon. Other bloggers will paraphrase the story and often amplify the negative aspects of the article. This is what happened on the popular ZeroHedge website, where the post about the Wall Street Journal article was made even more negative and was retitled, The Greenwich Housing Market Is Imploding As Prices Tumble As Much As 25%.
The title, while dramatic, comes from a relatively common situation when selling very high-end houses, which are often listed at 25% more than their final sales price. High-end houses are unique, hard to price, and often come with the high-end owner’s overconfidence. As a result, the original list price is frequently much higher than the sales price. Reporters and bloggers love to talk about the huge discounts that sellers must take to sell their houses, as if this is a sign of major market weakness. While having to take big reductions in price ranges under $5 million is a sign of market weakness, it’s not so much in the high-end market where the sales price (SP) to original list price (OLP) ratio will always be lower. In 2018, our overall SP/OLP percentage was 92%, but over $10 million it was 81.5% and over $15 million the two houses sold at 56% of the original list price. Is this a sign of market weakness or simply owners who select brokers willing to list a house at the highest initial price, regardless of whether the price comports with today’s market?
The short answer is, you really can’t tell. But we do know that reporters love to quote this price drop as a major sign of high-end market weakness. The other thing that happens with these follow-on articles is their narrative is often more strident and less carefully worded.
The lead paragraph of the Wall Street Journal’s article reads: Once asking $3.795 million, the four-bedroom property will be sold May 18 with Paramount Realty USA for a reserve price of just $1.8 million.
The ZeroHedge post reads: It’s price tag used to be $3.795 million, but now the four-bedroom property will be sold for its reserve price of just $1.8 million, according to the Wall Street Journal.
So, the story goes from an article about an auction with a low reserve to a story about a house that had a $3.8 million list price and now “will be sold” for its $1.8 million reserve price.
I could go on, but I’m already well over my word limit, so suffice it to say there are lots more examples of articles bashing Greenwich real estate in a biased manner. The problem is that enough of these articles have accumulated that they are doing real damage to our real estate market. Having a paper like this one, which is more interested in accuracy than in day-glo stories, is essential to presenting a more factual picture of what’s actually going on in the market.
I am not pushing for rosy stories about the Greenwich market. I am advocating for balanced reporting that takes in the ups as well as the downs. We had a poor first quarter in 2019, which came after a 2018 that had more sales than the previous year. We need both reported.
Mark Pruner is an award-winning real estate agent with Berkshire Hathaway. He can be reached at 203-969-7900 and firstname.lastname@example.org.