“Just how far down and down and down are house prices going to fall?” asked CNN’s Soledad O’Brien after market prices fell for the first time in 11 years.
O’Brien’s words introduced a story about falling housing prices by reporter Gerri Willis, host of CNN’s “Open House.” Willis characterized the slight decline as a sign of economic distress.
“The housing bubble appears to have finally burst,” added O’Brien as Willis said that the bubble has been “slowly deflating” in localized areas, but “a new report shows the trouble is more widespread.”
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 “Open House,” 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 – listed now for $799,000.
According to the National Association of Realtors report Willis cited, there has been a “2 percent drop in housing prices.” 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 Koning’s home was not mentioned.
One expert Willis talked to was Robert Shiller economist and author of “Irrational Exuberance,” who said the downturn could mean “bankruptcies, foreclosures, and people out of jobs. But we’ll recover. It’s not nuclear war.”
Contrasting Shiller’s point was David Lereah, chief economist with the National Association of Realtors, who gave a reason for the price decline. “The housing markets just went through a really big boom. We need a correction,” said Lereah.
Willis also stated that Lereah had “previously been optimistic” and expected prices to decline “for awhile,” though Lereah said that is only through the remaining three months of 2006.
To end the piece, Willis said that the National Association of Realtors’ projects a 3 percent total decline in median prices by year’s end. Then she said, “Prices have risen 60 percent in the last five years, so if you’ve owned your home for much of that time at all, you may still be ahead even when the price correction ends.” Although Willis said many homeowners “may still be ahead,” 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 O’Brien as evidence of the collapse or “bust” of the housing “bubble.” But this wasn’t a new phenomenon.
The media have been warning about the “housing bubble” for more than five years. As BMI reported, “What 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 gains…The housing market is less liquid and prices don’t usually change quickly like stocks do.”