No sooner did the stock market tank than the financial press started to question or predict that real estate is the next bubble to burst. No one wants to see their home depreciate along with a stock portfolio, and some publications may be capitalizing on this fear to sell more magazines. Does the financial press have an agenda? You be the judge.

In the October 28th issue of Fortune, a story called "Is Real Estate Next?" by Shawn Tully appeared. Under the provocative cover story headline was written, "With stocks in the tank, Americans are counting on home prices to keep rising. They won't."

Inside, beginning on page 58, the magazine showcases a San Francisco listing that sold in 1996 for $285,000 and is for sale in 2002 for $1,195,000. The home is a modest three-bedroom Victorian home. The inside headline blares "Is this home worth $1.2 million?"

The major points of the article are that housing prices have risen 51 percent since 1995. Housing bubble dangers are strongest on both coasts. Consumers will react to rising interest rates by pulling back on high home prices. Homes won't return gains like they did last year at 6.5 percent and that consumers will be lucky if their homes return low single digit gains. A housing bubble will cause the economy to suffer.

Housing prices tumbled during the Gulf war recession and remained flat until 1995, writes Tully. Government incentives, a raging stock market, a swelling labor market, falling inflation and interest rates, a more restrained homebuilding industry, and low interest rates all contributed to moving housing upward. Housing prices are defying reason by going higher during a recession fueled by record low interest rates. Housing prices have risen while stock prices have plummeted. Homes are a virtual ATM, with homeowners removing cash in equity loans and refinancing - $350 billion in 2001 and 2002, spending $70 billion and holding $165 billion in checking and money-market accounts. Housing's impact on the economy is unprecedented allowing it to stretch instead of shrink. What causes a bubble? Treating houses as investments instead of homes. Home aren't like "shares of Cisco: If your house isn't appreciating, it's still valuable as a place to live."

While author Tully admits that a bubble isn't happening yet, the article fairly outlines the economics of housing appreciation and mentions the differences between the overheated 80s market, its subsequent crash in the early nineties, and what is happening recently.

However, Coldwell Banker President Alex Perriello still has some problems with it, enough to compose a letter to the Fortune editor, Rik Kirkland.

In his letter, Perriello points out the $1.2 million house that was featured, a Coldwell Banker listing, was on the verge of being condemned in 1996. The owner invested several hundred thousand dollars improving it, putting it on "par with many other properties in the San Francisco area."

He also takes issue that housing prices won't keep rising. "The reality is however, since 1969, the first year the nation's average home sale prices were tracked by HUD, there has never been a year in the last 33 that the nation's average sales price has not risen," writes Perriello. Through the oil crisis of 1978-1982, "there was a 50% drop in the number of homes sold, but prices still rose."

Perriello says that national research indicates that the demographics exist to sustain the growth of the real estate market, citing boomers reaching their peak earning and home-buying years, children of boomers getting into the market for the first time, and a steady rise in minority and immigrant home ownership rates.

Fortune did indeed print Perriello's letter in the next issue, but significantly edited the letter due to space restrictions. Perriello's point that the Coldwell Banker listing was a nearly-condemned home and that it had been substantially remodeled putting it on par with many other homes was edited out, along with the statistics mentioned above.

"We are now requesting they print a correction to their original story," says Perriello.

According to Perriello, the financial press has it in for real estate.

"I have a drawerful of these stories," says Perriello. "Most every negative story I read about real estate, including Friday's Wall Street Journal article (front page of the Weekend Section) is supported by anecdotal evidence and speculation. Quite frankly I'm getting sick and tired of irresponsible journalism that attacks one of the few bright spots in the US economy...housing."

What does the press have to gain by talking about a "housing bubble?"

"Their best interest could lie in promoting stocks," says Perriello, "and the press really missed predicting the bubble in the stock market especially in the NASDAQ and technology stocks. So they are thinking 'Let's find another industry and talk about a bubble there.'"

But isn't that a little like shooting fish in a barrel? Housing prices always fall when jobs are lost and the economy is in a recession, but they do so at the local level.

"We've seen booms and busts in real estate for the past 25 years, but from a national perspective, there's never been a year when the average home price has gone down since 1968," restates Perriello. "When you look at that, there's been big peaks and valleys in the number of homes sold; the biggest run-up and dip was in 1978 when close to 4 million homes sold. By 1982, it had dropped to 1.99 million, so the market was cut in half. Unemployment by 1982 was almost to ten percent, interest rates were over 15 percent - they had almost doubled, and the average home price went up each and every one of those years.

"The homeownership rate stayed the same," he continues. "It was 1978 - the peak of the market, it was 64.7 percent, and at the bottom of the market (1982) it was the same - 64.7 percent. What that tells me is that when the market slows down, people don't give their houses away. They don't move. If you look at the demographics, the interest rates, everything supports a strong real estate market."

"These national publications tend to build a story on anecdotal evidence in one market or another and try to speculate or somehow extrapolate that this is going to happen everywhere. They pick overheated markets, like Boston, or San Francisco, and try to draw conclusions from them that aren't relevant."

"In many cases, they also use provocative headlines, and that obviously indicates there is a bubble which may or may not be the case. As with Mr. Tully's story. I'm concerned that this is like a water torture. Maybe one article isn't going to influence them (buyers and sellers) but over time, all this stuff has a negative impact on our business because it can influence consumers. In talking to real estate agents, they are concerned, their clients are going to read these publications.

But as Tully wrote there isn't a housing bubble yet, Perriello's fears that the financial press is pushing to burst a housing bubble may be a little premature, too.

"I haven't talked to an agent yet who says that a buyer has called and canceled a home purchase because of bubble fears," he says. "My concern is that when you read some of these articles, that they aren't as bad as the headlines suggest."

Part II will post tomorrow featuring an exclusive interview with Fortune's Managing Editor Rik Kirkland.