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
average.
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 [1]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 [2]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.