CNN Claims Small Price Drop Indicates Widespread Housing Problems
â€śJust how far down and down and down are house prices going to fall?â€ť asked CNNâ€™s Soledad Oâ€™Brien after market prices fell for the first time in 11 years.
Oâ€™Brienâ€™s words introduced a story about falling housing prices by reporter Gerri Willis, host of CNNâ€™s â€śOpen House.â€ť Willis characterized the slight decline as a sign of economic distress.
â€śThe housing bubble appears to have finally burst,â€ť added Oâ€™Brien as Willis said that the bubble has been â€śslowly deflatingâ€ť in localized areas, but â€śa new report shows the trouble is more widespread.â€ť
Willis interviewed homeowner Kate Koning and stressed that the she and her husband have been trying to sell their Connecticut home for nearly a year and had lowered the price twice. Koning said the starting price was $875,000.
On the September 9 â€śOpen House,â€ť the Konings and their realtor, Sherri Steeneck of the Higgins Group, were interviewed about their trouble selling the home. According to the Higgins Group, the house is a four-bedroom, three-bath property on a little more than an acre lot â€“ listed now for $799,000.
According to the National Association of Realtors report Willis cited, there has been a â€ś2 percent drop in housing prices.â€ť The drop was in median housing prices, which fell from $229,000 in August 2005 to $225,000 August of this year. The massive difference between the median housing price and the Koningâ€™s home was not mentioned.
One expert Willis talked to was Robert Shiller economist and author of â€śIrrational Exuberance,â€ť who said the downturn could mean â€śbankruptcies, foreclosures, and people out of jobs. But weâ€™ll recover. Itâ€™s not nuclear war.â€ť
Contrasting Shillerâ€™s point was David Lereah, chief economist with the National Association of Realtors, who gave a reason for the price decline. â€śThe housing markets just went through a really big boom. We need a correction,â€ť said Lereah.
Willis also stated that Lereah had â€śpreviously been optimisticâ€ť and expected prices to decline â€śfor awhile,â€ť though Lereah said that is only through the remaining three months of 2006.
To end the piece, Willis said that the National Association of Realtorsâ€™ projects a 3 percent total decline in median prices by yearâ€™s end. Then she said, â€śPrices have risen 60 percent in the last five years, so if youâ€™ve owned your home for much of that time at all, you may still be ahead even when the price correction ends.â€ť Although Willis said many homeowners â€śmay still be ahead,â€ť the huge difference between the price increase and decline would make that obvious.
The 2 percent decline in median housing prices was painted by Willis and Oâ€™Brien as evidence of the collapse or â€śbustâ€ť of the housing â€śbubble.â€ť But this wasnâ€™t a new phenomenon.
The media have been warning about the â€śhousing bubbleâ€ť for more than five years. As BMI reported, â€śWhat those reports failed to explain was that an investment bubble occurs when an asset appreciates by extraordinary percentages for a short period of time, culminating in a rapid decline that wipes away most of the gainsâ€¦The housing market is less liquid and prices donâ€™t usually change quickly like stocks do.â€ť