I call this type of communication “relationship pinging.” It’s a term I coined about twenty years ago. At the time, I was receiving messages from a former college classmate who would send a mass e-mail to everyone in her address book. The theme was always the same: “Here’s a cause or charity I’m interested in at the moment, and I expect you to contribute.” She reacted angrily when I responded, simply, “Unsubscribe.”

I’ve had people alert me every time a dog goes missing at a Wal-Mart somewhere in America. Some people send me every joke that comes across their desk. Others want me to know about every bulletin they see on Fox News or MSNBC. These messages are always about them, not me or us.

The etymology of the term “relationship pinging” will be obvious to some of you. In the early days of personal computers, Internet connections were not persistent. That is, if you failed to type a keystroke every few minutes, your connection would “time out” and  be lost. You would then have to log in again, a powerfully annoying feature. Some bright young programmer came up with a little bit of code you could run on your computer that would “ping” the connection at regular intervals to keep it from timing out. A ping was just a tiny packet of meaningless information sent to the server to remind it that you were still there.

Relationship pingers are doing the same thing — trying to keep the relationship alive with minimal effort and no meaningful contact. It’s a phenomenon that has existed for centuries, but it is particularly prevalent during the age of Facebook, when people have replaced actual friends with “buddy lists.” People no longer get together to share stories of their lives over a sidecar. Instead they post to their “wall” once in a while. Some have taken it to a perverse extreme, tweeting every few minutes to let their “followers” know, “I’m eating the awesomest burrito right now.” (Thanks to Alex Watts for that one.) The personal relationship is dead.

I sometimes feel this blog is an extension of that problem. There isn’t enough interaction here to give me the sense that anyone is actually reading my posts. Of course, this is mostly my fault for not publicizing this blog, but I wonder. Do people actually read blogs? I don’t know. But I’d love to hear from you.

I know this has nothing to do with real estate, but I thought you might enjoy seeing some wildlife pictures I took recently on an extended trip to Florida.

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Eastern Lubber Grasshopper

Here’s a link to Laura’s post: Why I’m Not Hiding Any More

A. Yes. And no.

As most of you know, I’ve been bearish on home prices since 2002, when I first began warning my clients to stay out of real estate investments if at all possible. Sell your home now and rent, I told them. The economic news has continued to be dire since then, and there are few signs of a lasting recovery in sight. And yet, somehow, the stock market has been rising steadily, which bodes well for the real estate market as well. What’s going on?

Certainly there is plenty of reason to fear another downward spiral in prices. The lending environment is, shall we say, challenging. A large proportion of recent sales have been foreclosures and their close cousin, short sales. (A short sale is simply a sale in which the purchase price is not sufficient to pay off the mortgage.) And we can expect wave after wave of foreclosures in the future as people struggle to pay their mortgages while out of work and unable to find jobs. Things look pretty grim. And yet.

And yet, stocks have bounced back strongly from their lows last year. What gives? The Yale economist Robert J. Shiller may have an answer. He suggested recently that home prices aren’t tied so much to economic data as they are to homebuyer sentiment. Indeed, if you ask around, many people are enthusiastic about the prospects for improvement in real estate prices. There seems to be a general sentiment of optimism among people who have been sidelined by falling prices. If enough momentum develops, recovery could become a self-fulfilling prophecy.

In my opinion, it all hinges on whether there are enough buyers who can still afford to get into the market for real estate.

A: We’ll find out next week.

There was, in fact, a headline on the front page of The New York Times on Sunday, October 12: Those with a Sense of History May Find It’s Time to Invest. To my way of thinking, this is the rough equivalent of The Worst is Over. As you know from my previous post, when The New York Times reports the worst is over, the worst is just beginning. It is entirely possible that the stock market continues to drop sharply next week.

Consider another unattributed article from the Times on the same day. This one was quite clever, comparing today’s news to actual quotes from 1929, just moments before the stock market crash. Here are some excerpts from the piece:

From a “Wall Street Analysis” by Thomas C. Shotwell in “The World Almanac for 1929″:

The market is following natural laws of economics and there is no reason why both prosperity and the market should not continue for years at this high level or even higher.

Irving Fisher, professor of economics at Yale University, in The New York Times, Sept. 6, 1929. He ended up losing much of his wealth in the crash:

There may be a recession in stock prices, but not anything in the nature of a crash.

J.L. Julian, a partner in the financial firm Fenner & Beane, in The New York Times, Oct. 26, 1929:

The worst is over. The selling yesterday was panicky brought on by hysteria. General conditions are good. Our inquiries assure us that throughout the country business is sound.

President Herbert Hoover on Dec. 3, 1929, in a speech before a joint session of Congress:

I am convinced . . . we have re-established confidence. Wages should remain stable. A very large degree of industrial unemployment and suffering which would otherwise have occurred has been prevented.

Treasury Secretary Andrew W. Mellon, Dec. 31, 1929, in a statement issued while he was yachting off Nassau, the Bahamas, on his winter vacation:

I see nothing . . . in the present situation that is either menacing or warrants pessimism. During the winter months there may be some slackness or unemployment but hardly more than at this season each year. I have every confidence that there will be a revival of activity in the spring, and that during the coming year the country will make steady progress.

Sound familiar? Over the next four years, the stock market lost 90% of its value and launched the Great Depression. It took 25 years for the market to recover from the events that began in October of 1929. I wouldn’t invest your child’s college tuition in the markets right now if I were you.

All of this may seem frightening, but don’t worry. There is a limit to how low the stock market can go. That limit is zero.

Data through February 2008, released by Standard & Poor’s for its Shiller Home Price Indices, the leading measure of U.S. home prices, show declines in the prices of existing single family homes across the United States worsened in the second month of the new year, with 17 of the 20 now reporting MSAs [Metropolitan Statistical Areas] posting record low annual declines, 10 of which are in double-digits.

Both of the composite indices are now reporting annual declines in excess of 12.5%. The 10-City Composite posted a new record low annual decline of 13.6%, and the 20-City Composite recorded an annual decline of 12.7%.

“There is no sign of a bottom in the numbers,” says David M. Blitzer, Chairman of the Index Committee at Standard & Poor’s. “Prices of single family homes continue to drop across the nation. All 20 metro areas were in the red for the February-over-January reading. In addition, 19 of the 20 MSAs are still reporting negative annual returns. The monthly data show that every one of the MSAs has now declined every month since September 2007, marking six consecutive months. On top of that, remained steep w the declines have with eight of the 20 MSAs and both composites reporting their single largest monthly decline in February.”

Good news or bad? Stupid question, right? Of course it’s bad news. Well, maybe not, if you read my entry on the Home Price Hype Cycle. In fact, this is just the headline we’re waiting for to signal we are nearing the bottom. Granted, National Realty News is not The New York Times. But keep your eyes open. When a respected, mainstream news organization like the Times publishes that headline, it’s time to breathe a sigh of relief. It’s the first sign that prices are close to bottoming out.

Incidentally, the Times published a headline above the fold in the Mutual Fund Report section on April 6 that read “Almost as if the Sky Were Falling.” Have you noticed that, after a brief dip, the stock market has gone straight up since then? Careful, though. They did say “almost.”

Prices are certainly lower than they were two years ago. In some cases, a lot lower. But that old adage still applies: Just because something has fallen in price doesn’t mean it’s cheap. In fact, I believe we have a long way to go before hitting bottom. It may take years for prices to recover. Whether you should buy depends on the answers to quite a few questions, including: 

• Are you upgrading from a less expensive home? If so, the longer you wait as prices fall, the more you’ll save on the house you buy than you’ll lose on the house you sell.
• Are you downsizing? Then the reverse is true. You’ll lose more on the house you sell than you’ll save on the house you buy. Take action as quickly as possible.
• Will you kick yourself if you miss the next real estate boom?
• Can you imagine yourself renting for a few years? (Hint: it’s what I decided to do when the market peaked.)
• Are you honestly willing to pay a fair market price for your home, or do you demand a bargain?
• Do you have a choice? Or is your employer/spouse/school the real decider-in-chief?

The truth is, buying a home isn’t the right choice for everyone. A good Realtor® will tell you when it isn’t. That’s a sure sign he cares more about helping you in the long term than about making sales in the near term, don’t you think?