Newspaper advertising doesn't work, according to many Realtors, so they've been putting their advertising dollars elsewhere, creating a slow drain on the revenues of newspapers across the country. Could falling revenues be behind recent large-scale newspaper editorial attacks on the real estate industry?
"From personal experience, I never get phone calls from classified ads on real estate for sale. It is a waste of money so I quit it," says Realtor Bill Barnes, Lake Havasu City, Arizona. "What works is an MLS listing. And 85 percent of homes sell through Realtors. It's free to a potential buyer, and buyers want to have an experienced person handle their transaction."
Others say online services such as agenda-free craigslist.com have siphoned off billions in newspaper ad revenues. A report called "Competing With Craig," written in 2004, suggested that craigslist costs Bay Area newspapers between $50 and $65 million alone.
In recent months, the number of negative stories against the real estate industry has been staggering. From real estate commissions to the alleged real estate bubble to high home prices , the media has steadily given residential real estate, its practitioners, and its investors a hard time.
What's the reason behind the negative focus on residential real estate? Some believe it could be a power play to get more agents and/or for-sale-by-owners to buy ads since many former customers say they no longer buy ads, and they realize newspapers aren't their friends.
Recently, Tribune Company (owner of The Los Angeles Times and Chicago Tribune, among others) acquired ForSaleByOwner.com, causing many agents to assume that newspapers are drawing their line in the sand -- against agents. Tribune is also part of a cartel that owns Classified Ventures which recently purchased HomeGain, a company that "matches" homebuyers and sellers with agents willing to compete using their commissions.
Says Denver, Colorado, broker Judith Clausen, "I stopped advertising in newspapers about two years ago. I figured they were after us."
According to self-reporting by the The Newspaper Association of America , real estate revenues are up, not down. There have been some anemic years, notably 1999 (+.79%), 2000 (+1.6%), and 2002 (+4.50%) but 2005 roared back with +9.90% increase in real estate revenues.
One way to interpret the numbers is that newspaper advertising appears to go up as sales get into trouble, causing more real estate agents to buy newspaper ads. When record sales were still being set in the first quarter of 2005, newspapers lost business -- -0.3%. By the end of the year, when "bubble" stories clouded the media, newspaper revenues came roaring back with a +16.21% increase in the fourth quarter. The first quarter of 2006, when most say the bubble has popped, the NAA reports a whopping 26.3 percent increase.
Curiously, 2004 and 2005 reported healthy increases, about when bubble talk began in earnest. "It's the "rising tide" effect," explains Jim Townsend, editor of Classified Intelligence, a subscription-based research broker for the advertising industry. "In 2004-5, ad revenues were floated by the housing bubble -- and newspapers were surfing the wave."
Newspaper revenues may be up, but according to the National Association of Realtors "2005 Profile of Home Buyers and Sellers," results from newspaper advertising are down and not from a sterling record. Newspapers are losing significance with buyers and sellers.
- In 2002, 80 % of buyers used newspaper advertisements in the search process. By 2005, 50 % of buyers did so.
- In 2002, 59% of sellers used newspaper advertisements, and by 2005, 48% did so.
The report went on to say:
- 90% of homebuyers use a real estate agent and 77 percent use the Internet as information sources in their home search, while only 50 percent use newspaper advertisements
- Citing information sources as most useful, home buyers named their real estate agent (72%), the Internet (69%), open houses (42%) and homebuilders (37%). Even yard signs (49%) soundly beat newspaper advertisements (29%.)
- 93% of Internet-using homebuyers used a real estate agent, 74% a yard sign, 55% an open house, and 53 percent used newspaper advertisements.
- Of buyers who did not use the Internet, the use of newspapers was more grim. 75% used an agent, 55% used yard signs, 33% used open houses, and 37 percent used newspaper advertisements.
- Buyers first learned about the home they purchased through their agents (36%), through the Internet (24%,) and only 5 % of the time through newspaper advertisements.
So, do newspapers do better during a bubble or when a bubble bursts? They may do better when there is fear in the air. That's the only explanation that makes sense of the negative backlash against Realtors that many newspapers are exhibiting. From stories about high commissions to home prices being too high, many Realtors are beginning to suspect a self-serving agenda from their advertising partners.
"Our local papers, (Florida Today, a Gannett publication) are running articles that 'homes are selling for too much money!,'" says Pat Argo, a Titusville, Florida broker. "If homes are selling to willing buyers, they are not selling for 'too much!' The buyers in the market have always controlled the market value."
She says, "I believe the papers are deliberately trying to make it harder for us, so we will consider going back to more newspaper ads, and to scare the sellers into taking less so they can say they made a difference."
Argo says the home seller isn't being helped by all this negative publicity. "Many of the sellers here are former space program workers and retirees who depend upon their equity to take care of themselves and not become a burden on society or their families," explains Argo. "Our little county of Brevard only got a small part of the recent hot markets, at the end, of course! Especially northern Brevard, which is about 40% government owned property for Parks, Wildlife refuge endangered lands and the Space Center. Every time anything negative hits the space program, our market takes a hit."
It's not surprising that newspapers would turn to the Internet considering the NAR's numbers, but some worry that turning from real estate agents for revenues will work against consumers.
Steve Cook, spokesperson for the National Association of Realtors is also on the board of the National Association of Real Estate Editors (NAREE.)
"Every year, our membership numbers go down," says Cook. "Some are saying that the real estate sections of the newspaper are going to go away soon, and there will be less coverage and less knowledge about the industry. Fewer are assigned to the residential real estate beat, and the quality of coverage will decline."
The problem with that is the dissolution of what could be a valuable educational format for consumers.
