“What goes up must come down. But how will we know when the housing market has hit rock bottom?” Allen Wastler started off “In The Money’s” gloomy housing story with a dose of doom and it only went downhill from there. The March 3 show found negatives in recent housing numbers and added to recession fears.
“Well, you know I wish I had better news, but the numbers this week were just horrific,” said CNN correspondent Gerri Willis. “…I don’t have happy news here,” Willis continued, saying that home prices and new-home sales were down. She mentioned that existing-home sales – a large share of the market – were up, but quickly dismissed that news.
Wastler and Willis wrapped up the housing segment playing on viewers’ fears of a recession after an up-and-down week on Wall Street. Willis said the question wasn’t simply what happens in the housing market, but in the overall economy.
“The conversation about recession this week isn’t just bad for the stock markets; it’s also bad for housing,” Willis said. “When people lose their jobs, we know what happens.”
Among the chief worries was people defaulting on high-rate mortgages. “…Mortgages and mortgage lenders are having trouble, and particularly with subprime,” Willis said. “But now the problem with subprime is so pervasive, so out there everywhere that it’s starting to affect lenders who lend to other segments of the marketplace as well.” She said people would have trouble refinancing, especially those with adjustable-rate mortgages (ARMs).
Willis said banks were looking to reduce their exposure after getting heavily involved in subprime lending, but didn’t explain the market, the banks’ position and the personal responsibility behind getting an ARM.
Home buyers who don’t read the fine print have been shocked when their adjustable rates actually adjusted – and went up drastically.
As the Business & Media Institute has noted, the media have played up fears of adjustable-rate mortgages before, without emphasizing the pros and cons of mortgage buyers’ decisions. However, network news in the fall of 2006 did caution viewers to pay attention to their home buying and reminded them that foreclosure is not exactly an attractive option.
But Willis included the fear factor as she talked about folks in Detroit who walked away from their mortgages when they had trouble selling. “They’re under water completely,” she said.