Collapse of Newspaper Real Estate Ads

Must-read Bloomberg piece on the collapse of newspaper-based real estate ads. While some of this has to do with the troubles in the real estate market, it has more to do with the reallocation of ad dollars from newspaper to electronic media. Anyway, it’s harrowing reading:

A 14 percent decline in spending on real estate ads in the
first quarter accelerated in the second period, estimated media
consultants Borrell Associates in Norfolk, Virginia.

Newspapers’ real estate ads will drop by more than one-
third by 2011, while online housing ads will rise 60 percent and
overtake print for the first time, Borrell predicted.

The collapse is especially significant because home-sale ads
propped up newspapers last year, after automotive and employment
spending declined. Real estate accounted for $5.16 billion, or
30 percent of all classified spending at newspapers, where
overall advertising totaled $46.6 billion in 2006, according to
the Newspaper Association of America.

“Two billion dollars a year is going to come out of
newspapers,” said analyst Matt Booth at Kelsey Group in
Pasadena, California. “It’s going to be tough to make that up.”

… Newspaper executives say the drop in real estate ads is
cyclical, concentrated in states where housing markets have
slowed the most.

… Brokerage executives differ, saying they will shift money
to the Internet permanently because advertising is less costly
and the Web offers consumers more information.

“Older sellers say, `I bought this house through the
papers so I want to sell it in the paper,”’ said Stephen Baird,
president of Baird & Warner, Chicago’s largest independent
broker. “When today’s buyer sells the same house in five years,
the paper will be irrelevant to them.”

[Update] More here on the how credit risk is taking down newspaper cos.