I Hate to Burst Your Bubble ...
The news media have been living in a bubble since before 9/11. Despite facts that indicate the market is cooling as many experts had expected, journalists insist there is a housing crisis.
It’s unsurprising that the home market came back to earth a bit after its meteoric rise. But news that it was “cooling,” as Fed Chairman Ben Bernanke had predicted, was treated as “kinda boring” by Gerri Willis of CNN’s “American Morning” on July 21.
That’s pretty amazing, given that reporters have been cautioning us about the housing bubble as far back as September 2001, when Forbes and BusinessWeek both raised the issue.
Just two days before the CNN broadcast, Bernanke had testified to the U.S. Senate that “the available indicators suggest that economic growth has more recently moderated from that quite strong pace, reflecting a gradual cooling of the housing market.” That’s Fed speak for “Don’t worry, be happy.”
Bernanke had told everyone this was what he expected. And before him, Alan Greenspan warned of “froth” in the market, but no big bubble because real estate is a local purchase. National Association of Realtors (NAR) Chief Economist David Lereah forecasted in January that the housing market would “normalize” from its record-setting 2005 existing home sales mark.
But the media insist on playing the role of the boy in the bubble.
NBC “Nightly News” did a May 25 report about “housing on the bubble” that warned about the danger of rising interest rates to people with adjustable-rate mortgages. But the graphics told the real story. Little bubbles bounced across the screen filled with dollar signs as reporter Ron Mott told of people in danger of losing the roofs over their heads.
The report highlighted a woman unhappy about her higher mortgage payment from $1,300 to $2,000 – for a $129,000 house. A normal loan for the entire amount would be a little bit more than $800, but no one at NBC did the math.
Meanwhile, NAR reported on August 1 that pending home sales, what the group calls “a leading indicator for the housing sector,” have risen the past two months. While that is lower than 2005, last year’s sales were an all-time high. And still, prices are up from last year. The national median existing-home price was $231,000 in June, up $2,000 from last year.
ABC took a more upbeat tactic with the July 30 “Good Morning America” declaring the current market as “good news for buyers.” Anchor Kate Snow then followed with a mistake as big as a house about the mortgage rate. “We heard Betsy Stark mention in the piece that the 30-year rate I guess is at its highest ever, so what does that mean?” Snow asked Realtor Allyson Bernard, who was savvy enough to correct the error. The current rate stands at about 6.7 percent. “My first home, I had a 21-percent mortgage rate. So these rates are nothing,” said Bernard.
Snow tried to laugh off the mistake: “Yeah, I shouldn’t have said ‘ever,’ but it’s – highest rate in several years. I exaggerate a little bit,” she said, chuckling.
Too bad all of the network guests weren’t like Bernard. One problem the networks have is the experts they choose. If you predict a housing apocalypse, that’s a clear route to the major media. Look at Dean Baker, from the Center for Economic & Policy Research (CEPR). Back in August of 2005, he went on “CBS Evening News” and warned, “We are seeing a bubble.” He didn’t stop there. “It’s very, very risky. You know, this is just like buying into the Nasdaq in, you know, late ’99.”
This wasn’t anything new for CEPR. In March of this year, Baker warned, “Like the stock bubble, the housing bubble will burst. Eventually, it must. When it does, the economy will be thrown into a severe recession, and tens of millions of homeowners, who never imagined that house prices could fall, will likely face serious hardships.”
While Baker might be disappointed because we haven’t had an economic meltdown, why don’t the media ask him some tough questions? He’s been called a market pessimist or bear, but he’s been singing the same song since the initial bubble predictions of 2002.
Perhaps we should change the term from housing bubble to housing bumble.
Or better still, the networks could stop making endless predictions or “exaggerations” of disaster their stock in trade. Where’s the $5 gas they talked about after Katrina? How about the millions of dead from avian flu? Why not stop predicting the news and stick to reporting it?
The media have been warning of a housing cataclysm for nearly five years. It’s time for a bubble wrap.
Dan Gainor is a career journalist and The Boone Pickens Free Market Fellow. He is also director of the Media Research Center’s Business & Media Institute www.businessandmedia.org.