NBC Pumps Up Housing Bubble with Extreme Example
Network spotlights problems of couple paying $2,000 a month for a $129,000 house and reporter doesnt find that strange.
By Rachel Waters
Business & Media Institute
May 26, 2006
Theres no place like home for media spin. The May 25
NBC Nightly News showed how far the networks will go to inflate
their image of a housing bubble even dwelling on a family paying
outlandish mortgage payments at rates far higher than the national
I am sad, angry, and confused, complained Bridget Edwards about the rapidly rising mortgage on her $129,000 home. She lamented the fluctuating cost of her variable rate mortgage payments from the typical $1,300 to $2,000. Confused was how viewers should have felt after watching the story. That story indicated the Edwards couple may face foreclosure on their home in the near future.
Walter Molony, spokesman for the National Association of Realtors, was asked about Mrs. Edwardss monthly payments and said her claim does not make economic sense to me. The only way he could could understand the payments would be if the Edwards had obtained some type of predatory loan which Molony said would be extremely abnormal.
According to the American Banking Associations Web site mortgage calculator, a 30-year fixed-rate loan for the entire $129,000 at 6.62 percent would work out to a mere $825 a month. Thats far less than the Edwards typical payment and roughly 40 percent of their higher payment. Its also the exact percentage quoted in the NBC report as the new national average. While mortgage bills also typically include taxes and fees, those would not fluctuate with the rate.
The story went on to discuss recent foreclosure rates across the country. NBCs Ron Mott said auctions are filling up with houses too pricey for many to keep. In fact in Dallas, where the Edwardss home is located, housing costs are 30 percent below the national average, according to an NAR analysis.
NBC focused the blame for homeowners hardships on recent worsening housing market numbers. The Edwards couple, however, said they were four months behind in their mortgage payments. Their payments would have had to increase by almost the full $700 for eight months to amount to that kind of debt. This was hardly a new problem for the Edwards.
Mrs. Edwards said she really didn't know the payments would change like this. Apparently she wasnt watching the very same networks Today show on June 20, 2003, when NBC cautioned viewers about just that. Jean Chatzky, Today financial editor, discussed the risks associated with a variable rate mortgage. You got to ask yourself how long am I going to be in this house? Because only then will you know if you'll be there long enough to either get out of the adjustment period or pay off the closing costs, Chatzky warned. She went on to suggest, You want to go with the fixed rate loan at the shortest term that you can afford.
In the latest report, Mott stated that many American families are finding themselves one crisis away from financial ruin and at the mercy of impending foreclosures. While rising rates are unfortunate for families such as the Edwards, the foreclosures are the result of borrowing beyond their means and not the result of a troubled housing market.
The entire segment was titled Housing on the Bubble? And to drive home this theme the network displayed images of houses and dollar signs floating across the screen literally in bubbles. The network continued to promote the idea that the American housing market is experiencing a bubble despite factual information to the contrary.
An earlier Business & Media Institute study explained how both the current and recent Fed chairmen have said there is no national housing bubble. And the National Association of Realtors (NAR) has stated that there has been no housing bubble in the U.S. since good record keeping began in 1968. NAR defines a housing bubble as an unsustainable gain in home prices. Popping the bubble would result in a significant loss of equity.