Q&A: Housing Bubble Blogger

The fall of 2004 was no time for real-estate pessimists. In red-hot markets like California, prices in some communities spiked 50 percent higher than the previous year's; multiple-bid offers were common on homes and cries of "they're not making any more land," fueled a property-buying frenzy.

But something about the mania just didn't sit right with Ben Jones. The Texas native learned a hard lesson in the 1980s, when the savings and loan scandal hit and real estate slumped just as he was preparing for a career in the property market. "I jumped in at the worst possible time," the 42-year-old recalled from his home in Sedona, Arizona. That experience, coupled with a background in corporate accounting, made him wary of highflying markets, so when he saw housing appreciation rocket up and mortgage-lending restrictions sink low, Jones decided that this was a housing bubble, and he was going to warn his friends.

At first Jones just sent his cautionary data and news bites by email, but after a couple of months, he found blogging was a better way to get the word out.  The  blog, www.thehousingbubbleblog.com,  quickly evolved into an information supercenter for real estate addicts. Jones posts news stories, economic data, and analysts' reports on the housing market (often minutes after their release), then lets his many contributors loose to offer their own analysis and rebuttals.

In early 2005, Jones was one of a handful of bloggers raising the red flag about real estate prices amid a sea of industry pom poms.   Now it seems that even realtors are talking about a "cooling"—if not a bursting of the bubble—as prices sag and interest rates rise. Meanwhile, Jones' blog, one of many on the subject, has grown to 85,000 readers a month. NEWSWEEK's Kathy Jones (no relation) talked to the real estate seer about the power of collaborative blogging and why some readers use his site as an anonymous confessional. Excerpts:

In my opinion, it is because we are almost all in the housing market, one way or another. Add the personal stake many have, and emotions are naturally high.

It varies. I find about 60 percent of the material and others gather the rest. I give all that credit to the people that post because they're the ones that other folks find comfort in. The blog is really bigger than me, that's for sure. I've learned as much as anybody from my blog. Eighty percent of what I know about real estate I've learned from my blog—collectively there's some great wisdom out there.

I have heard from a few people. I have no way of verifying their accounts. If [they] made a decision based on the information that can be found on the Internet, that was their conclusion. I don't consider my blog to have been a deciding factor. People saw the research and made up their own minds.

Many industry professionals had private misgivings about the housing market of the last few years. It was natural that they found the anonymous nature of blogging to be an avenue for them to have a voice. It surprised me at first, but now I see that it was a practical form of expression.

Because it is a financial mania, like the Internet stock bubble. These episodes are very powerful, psychologically.

Not at all. Once I looked into the matter and discovered how far the fundamentals had detached from prices in the over-heated markets, I knew it was just a matter of time for a correction to take place. The simplest and the most alarming sign was that it was cheaper to rent than to buy—and that shouldn't be the case. That should have been a warning to everybody. I came to understand it directly from my real estate finance courses—if rents aren't covering the mortgage there's a problem.

Specifically what I very first noticed was in the fall of 2004, California house prices had had a little dip but then they took off again and were doing 22-25 percent year-over-year price increase-[and] they were already high to begin with. It was primarily those California numbers that caught my attention. Also, when I was combing for data one of the things I came up with was a huge increase in sub-prime lending. The more I got into it the more I found out [lenders] were doing anything and everything just to keep the game going.

I often hear people talk about seeing a glass half-full, or half-empty. Personally, I don't think that has a place in economic observations. I just want to know what's in the glass.  Housing blogs are already giving reporters more courage to challenge the status quo when it comes to real estate. Some of the papers in Florida come to mind. So yes, I expect to see more "professional skepticism," due to the experience with blogs and housing.

I say get your financial house in order—shed some debt, try to build up savings—because none of us knows what's going to happen, and it's never been bad advice to shore up your finances going into uncharted waters, especially given this lending environment.

Looking back at what our experience was in Texas, which was an oil and real estate bust [in the 1980's], [this] is not going to be as bad as some people might want to make it out to be. At the time in Texas it was kind of gloomy, but having lived through it, it was just a few years of a downturn.

Right now, it is paying all my bills. I can't complain. It's what I want to do. I got to kind of a crossroads in the summer of 2005.  I was putting a lot of time in, I didn't have any ads up, and I told myself and my family I was going to make a decision about whether to stop-[but] I decided it just seemed like too much to just walk away from. I decided to keep going because it seemed to matter to people, and it seemed like there was something good that would come out of it. I don't relish the idea of anybody losing money.

I am working on a project about blogging already. I would like to write a book viewing the housing mania through the lens of my blog.