Bubble, bubble, toil and trouble

Who writes the blog “Paper Economy”? I have no idea. And that is why I’m writing this item.

“Paper Economy” is billed as “A US Real Estate Bubble Blog.” Based on a post yesterday about the Boston Globe’s paean to Arlington, I’d say the blogger falls into the category of “sharp but too caustic for his own good,” which is a bulging category indeed. But his anonymity makes it difficult to judge his credibility. The offensive picture above is what he uses for his Blogger profile, accompanied by the phrase “I don’t need no stinking housing bubble!” Really.

Mr. (or Ms.) Paper Economy’s numbers seem impressive. But he writes as though Globe reporter Sacha Pfeiffer pulled her numbers out of thin air, which is clearly not the case. For instance, here is an eye-opening statistic in Pfeiffer’s piece:

As of early October, the average number of days houses sat on the market in Arlington before selling was 83, substantially less than the 146-day average for all of Eastern Massachusetts, according to the Multiple Listing Service Property Information Network.

Mr. P.E. (also known as Dimitris) does not actually challenge that number. Instead, he uses another set of MLS numbers thusly:

[L]ooking at the completed single family home sales for 2007 shows that 156 of 235 homes sold, or a whopping 66.4%, were sold UNDER LIST while only 56 homes, or 23.8%, were sold over the list price.

Taking into account the fact that Arlington has seen an average of 50% of all listed single family homes have price reductions (currently 55%), the sheer number of homes still selling under list is staggering.

Now, that’s important information, and it does run counter to the main theme in Pfeiffer’s story, which is that the good times continue to roll in Arlington. Indeed, she opens with an anecdote about a guy who recently sold his home for more than its listed price. If two-thirds of homes in Arlington are selling for less than list, as Mr. P.E.’s numbers show, then she should have included that fact.

But just as she does not deal with Mr. P.E.’s numbers, so, too, does Mr. P.E. fail to engage with Pfeiffer’s numbers showing that homes in Arlington are on the market for a much shorter period of time than in other communities. That’s a pretty good hook for Pfeiffer’s story, I’d say.

Mr. P.E. also writes:

Still further, the year-to-date median selling price for a home in Arlington is in fact $465,500, the lowest seen since 2003, according to the Warren Group NOT the $510,000 as reported in the article.

In fact, I don’t see where the Boston Globe got the $510,000 figure as it doesn’t match the median number reported for the year-to-date figure, the latest reported month or the current calendar year.

He doesn’t see where the Globe got the $510,000 figure? Hmmm … I think I’ve found it: “Among single-family houses, the median price in Arlington is $510,000, according to Warren Group, a Boston publisher of real estate data.”

Now, if you follow the link offered by Mr. P.E., you will find that it takes you to the self-same Warren Group. But he doesn’t show anything reporting that the median housing price in Arlington is $465,500. Rather, you have to register (sorry; not going to do it) and track down the information yourself.

I don’t know whether Pfeiffer did that or if, instead, she interviewed someone at the Warren Group who gave her the $510,000 figure. What I do know is that Mr. P.E. blithely asserts that she’s wrong without having any way of knowing whether her number is based on the same set of assumptions as his.

As I said earlier, Mr. P.E. seems pretty sharp. His post is not without value. But at the root of his screed is his belief that the Globe is in the tank to the real-estate business. Are newspapers dependent on real-estate advertising? Oh, my. Of course they are. But there’s a long, long leap from understanding that obvious fact to believing that Pfeiffer would write a story claiming real estate in Arlington is hot when it’s really cold.

Mr. P.E. goes so far as to demand “a complete retraction” of what he calls Pfeiffer’s “fictitious article.” He even includes Globe editor Marty Baron’s e-mail address. And you should definitely check out his response to an e-mail Baron sent him. I recommend decaf.

Mr. P.E. may know his stuff. As he points out, his posts have been featured at the Motley Fool and TheStreet.com, among other financial sites. But his anonymity, the picture he uses and his assumption of ill will on the Globe’s part undermine his case to the vanishing point.