CNN Claims Small Price Drop Indicates Widespread Housing Problems
âJust how far down and down and down are house prices going to fall?â asked CNNâs Soledad OâBrien after market prices fell for the first time in 11 years.
OâBrienâs words introduced a story about falling housing prices by reporter Gerri Willis, host of CNNâs âOpen House.â Willis characterized the slight decline as a sign of economic distress.
âThe housing bubble appears to have finally burst,â added OâBrien as Willis said that the bubble has been âslowly deflatingâ in localized areas, but âa new report shows the trouble is more widespread.â
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 âOpen House,â 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 â2 percent drop in housing prices.â 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 Koningâs home was not mentioned.
One expert Willis talked to was Robert Shiller economist and author of âIrrational Exuberance,â who said the downturn could mean âbankruptcies, foreclosures, and people out of jobs. But weâll recover. Itâs not nuclear war.â
Contrasting Shillerâs point was David Lereah, chief economist with the National Association of Realtors, who gave a reason for the price decline. âThe housing markets just went through a really big boom. We need a correction,â said Lereah.
Willis also stated that Lereah had âpreviously been optimisticâ and expected prices to decline âfor awhile,â 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 yearâs end. Then she said, âPrices have risen 60 percent in the last five years, so if youâve owned your home for much of that time at all, you may still be ahead even when the price correction ends.â Although Willis said many homeowners âmay still be ahead,â 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 OâBrien as evidence of the collapse or âbustâ of the housing âbubble.â But this wasnât a new phenomenon.
The media have been warning about the âhousing bubbleâ for more than five years. As BMI reported, âWhat 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 gainsâŠThe housing market is less liquid and prices donât usually change quickly like stocks do.â