“So are we OK or in the early stages of a housing-led crash that might depress us all?”
That was the leading question of PBS economics correspondent Paul Solman on the November 17 “NewsHour with Jim Lehrer.”
The segment on the “slumping” housing market ignored much of the good news on the U.S. economy, insisting that housing would be its downfall.
As context for his story, Solman cited shaky consumer confidence, a suffering auto industry and the housing market as economic negatives. But his bad-economy premise was faulty. An Associated Press article, published the same day the show aired, reported that U.S. consumer confidence hit a two-month high with a score of 92.4 in November. And a previous report by the Business & Media Institute showed that October sales had jumped by 17 percent at General Motors and almost 9 percent at Ford.
Solman’s only positives were a strong stock market and low unemployment. He never mentioned America’s 38 straight months of job growth, nor did he point out that the U.S. economy grew by 5.6 percent in the first quarter of 2006. Additionally, though the media found plenty of time to complain about gas prices this summer, Solman never mentioned prices’ fall from summer highs.
His main point, however, was to tear down the economy via the housing market.
The segment featured an interview with Nouriel Roubini, professor of economics at the Stern School of Business at NYU. Solman left out the fact that this is not the first time Roubini has been an alarmist about the housing market.
In the October 2 issue of New York Magazine, Roubini insisted on the existence of a housing bubble when he said, “…since 1997, real home prices have increased by about 90 percent. There is no economic fundamental … that can explain this. It means there was a speculative bubble. And now that bubble is bursting.”
The National Association of Realtors (NAR) sees things differently. The association states that since good record keeping began in 1968 there has been no housing bubble. During his interview Solman did not question Roubini’s position on the existence of a housing bubble; instead, he played to his view by using the “bubble” terminology himself.
Ed Yardeni, Chief Investment Strategist at Oak Associates, was given a chance to respond to Roubini’s sensationalism, but his optimistic arguments were undermined. Yardeni insisted that “Americans aren’t stupid,” and on the whole aren’t buying what they can’t afford.
However, before Yardeni had a chance to present his side of the argument, Solman had spoken with Karl Case of Wellesley College. Case allowed for the possibility of a bubble burst when he said, “Well, if it [existing home sales] goes down by as much as it's gone up, that is a disaster.” Yardeni’s comments were followed by more remarks from Roubini, who predicted that the housing market is slowing down severely and that the future is full of delinquencies and foreclosures.
A November 10 press release from the NAR highlighted the positives that were absent from Solman’s segment. The release, titled “Housing Market Expected to ‘Coast’ Into 2007 With Modest Price Gains,” included forecasts for home sales and prices.
In 2006, existing-home sales were expected to fall 8.6 percent to 6.47 million – still the third-best year on record. NAR predicted existing home sales “essentially even” in 2007, falling slightly at 0.6 percent to 6.43 million. The release also predicted “the national median existing-home price should increase 1.9 percent for all of 2006 to $223,700, then another 1.7 percent next year to $227,500.”
