Almost every day, the network news breathlessly asks again: is the “housing crisis” over? Have gas prices topped out? Is the economy in recession? CBS and NBC took a downbeat approach to those questions March 24 and 25.
Existing Home Sales Up in February
Although the March 24 “CBS Evening News” had positive news to report – that existing home sales were up 2.9 percent in February from January, according to the National Association of Realtors [1] – things are likely to remain lackluster for the foreseeable future, according to Anthony Mason.
“Well, it will depend on whether we have a deep recession of course, Harry,” Mason said after being asked by “Evening News” guest anchor Harry Smith if the economy has hit bottom. “But if you’re looking for a bottom in sales, it probably won’t come until the end of this year. A bottom in prices – probably not until next year. And a rebound – maybe not until 2010.”
Lawrence Yun, chief economist for the National Association of Realtors, isn’t claiming we’ve hit a bottom based on the positive data. But he wasn’t quite as bearish as Mason when he told Forbes on March 24 [2] the one-month gain is a sign of a stabilizing housing market.
“We’re not expecting a notable gain in existing-home sales until the second half of this year, but the improvement is another sign that the market is stabilizing,” said Yun.
But Mason reported some expect housing prices to drop even further.
“How far can prices fall? Some say another 10 percent,” Mason said. “The spring and summer buying seasons just getting under way will be the real test of whether the housing market has come close to a bottom.”
The March 25 “Today” show on NBC was glum as well.
It’s “a rare glimmer of hope for America’s hurting housing market,” CNBC’s Melissa Lee reported. “Home sales were still down in the West, but the Midwest and South saw gains of just over 2 percent. The Northeast led the growth in sales with an increase of 11.3 percent.”
But, Lee added that “economists caution national existing home sales are still down almost 24 percent compared to last year.” And she made sure to use the dreaded “r-word.”
“Many believe that a recession is inevitable but they are hoping that this good news out of the housing sector will mean that any slowdown will be less shallow and shorter than previously expected,” Lee said.
Lee’s mixed report was sandwiched between two more definitively negative reports.
Gas Prices Down from Record High
The first focused on gas prices, which co-host Ann Curry said are still “hovering near a record high today.” AAA reports the national average is $3.255 a gallon, down from a recent high of $3.283 March 17.
“At gas stations around the country, it’s wallets that are running on empty,” reporter Savannah Guthrie said over images of $3.79 gasoline – illustrating the common journalistic practice of showing images of above-average prices. “Consumers [are] watching prices rise with rising concern.”
“AAA says gas prices typically jump before Memorial Day, but to see them go this high this early is troubling,” Guthrie said. “Prices have gotten so high, consumers may finally be reaching their breaking point and doing the one thing they haven’t been willing to do so far: drive less.”
Guthrie reported from a “slug line” in the Washington, D.C., suburb of Springfield, Va. “Basically it’s a carpooling system that started in the 1970s during the oil embargo and it’s popular again,” Guthrie said. “Basically how it works is drivers come here looking for more passengers; passengers line up looking for a driver. The whole purpose is to get into those High Occupancy Vehicle (HOV) lanes so that they can get to work faster, and more importantly these days, save money on gas.”
The system launched in response to the creation of High Occupancy Vehicle lanes. It is true that the government’s creation of HOV lanes was an attempt to encourage less gas consumption in response to the 1973 oil embargo.
But the slug lines maintained popularity even when gas was cheap. A web forum for “slugs” [3] was registered in 1999. The Web site’s owner, David LeBlanc, published a book on slugging the same year. Gasoline cost $1.17 a gallon in 1999, according to the U.S. Energy Information Administration [4].
Drivers pick up slugs to access HOV lanes, not to save money. In fact the slug-line rules of etiquette [5] say that “no money, gifts, or tokens of appreciation are ever offered or requested. A driver doesn’t expect the riders to help out with gas money. The relationship between the driver and rider is mutually supporting. The driver needs the slugs just as much as the slugs need the driver. If the driver wants help with the gas, he should organize his own car pool.”
“Today” closed out its triple threat with a mixed bag of analysis from CNBC’s Maria Bartiromo, who warned that “there are very few reasons to believe that gas is going to reverse course and go down significantly.”
When asked about the increase in existing home sales, Bartiromo said it meant little when “you’ve got one month of an increase after, you know, months and months of declines and prices are still down 30 percent year over year.”
The context Bartiromo didn’t supply is that 2004 and 2005 were record years for home sales [6]. Home sales had been on the rise since 2000 [7], peaking at more than 7 million in 2005. Even in markets, what goes up will likely come down at some point.
Bartiromo also predicted “further losses from a number of the investment banks,” referring to the recent collapse of Bear Stearns. “Having said that, a lot of people are looking for a bottom and they are saying, ‘Well maybe at this point they represent some opportunities,’” she said. “But there are very few reasons to believe that we have seen the end of the losses, a lot of these banks continue to hold mortgages on their balance sheet that have gone bad.”
But Bartiromo wasn’t all doom-and-gloom. “Lot of people say that in the second half of the year we will start to see a lot of this stimulus really take effect,” she said. “Many people expect the slowdown to go into ’09, but Ann, we’ve got a lot of stimulus and at some point things will certainly turn. We’ve just got to get through this and sort of let time play it out.”