MSM Spins Housing Recovery-Again

Greg Hunter’s 

The latest Case-Shiller Home Price Indices report came out yesterday.  This report is considered one of the best measures of the housing market nationwide.  It didn’t take long for the mainstream media (MSM) to, once again, spin a non-existent “recovery” story.  ABC News’ headline read “Home Prices Rise for Second Straight Month.”  The Wall Street Journal headline read “S&P Case-Shiller: U.S. Home Prices Rise 2.2% in May.”  While both headlines are 100% true, there is quite a bit of spin in the message.  (Click here for the ABC News story and here for the WSJ report.)  Reading these headlines, one could easily get the impression the housing market is making a significant turnaround, but the actual Case-Shiller data reveals just the opposite. 

Sure, month over month, there’s an uptick in home prices, but who looks at the value of anything month over month?  The best measure is year over year, and according to Case-Shiller, from May 2011 to May 2012, home prices dropped—again!  The Case-Shiller press release said, “. . .home prices fell annually by 1.0% for the 10-City Composite and by 0.7% for the 20-City Composite versus May 2011.”  (Click here for the complete Case-Shiller release.)  I am using the exact same press release the MSM is using.  Even though the price declines in housing slowed from recent months, they are still declining!  This should be especially frightening considering mortgage rates have been hitting one new low after another.  Recently, 30-year mortgage rates hit a new all-time low and are less than 3.5%!  The housing market should be taking off like a rocket instead of continuing to sink like a rock.  Home prices are back to where they were nearly 10 years ago!! 

Sure, there are some bright spots in the latest Case-Shiller report.  In Phoenix, home prices are up 11.5% year over year, but the housing market there was cut in half.  Atlanta, on the other hand, is down 14.5% year over year in the latest report.  Remember, this is with near record low mortgage rates!  So, what happens when interest rates (which are being artificially suppressed by the Fed) start going back up to more normal levels?  What would a 7 %, 30-year mortgage rate do to prices?  If you guessed crash home prices–bing, bing, bing, you’d be correct.   

You think I am bearish on the long term value of home prices?  I don’t hold a candle to Professor Robert Shiller, co-creator of the Case-Shiller index.  I did an exclusive interview with him just three weeks ago.  Here’s some of what I posted on the site:  “. . . When asked, ‘If the current housing crisis was a baseball game, what inning would it be?’  Shiller replied, ‘Maybe we’re in the fourth.’  Shiller recently said that home prices may not recover ‘in our lifetime.’  He cited the Florida land boom in the 1920’s, where prices did not rebound for a ‘half century.’  Shiller adds, ‘There are a lot of long term doubts about home prices right now.’  If real estate does not recover ‘in our lifetime,’ what about the banks still holding it?  Shiller called that a ‘dark scenario.’  Shiller says, ‘A lot of people have the mistaken impression that we must be at a bottom.’  He goes on to say real estate could go up in price but ‘There is also the risk of further substantial drops in home prices.’ ”  (Click here for the complete One-on-One interview with Professor Shiller.)  

The folks in the MSM evidently feel it’s their job to put the best spin on any housing story.  In reality, it’s their job to be fair and accurate.  The more accurate headline would have been: “Housing Prices Continue to Drop Despite Record Low Rates.”  I guess the honest truth is just too scary for the masses, so the MSM spins the housing recovery-again.    

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  1. acjitsu

    These mainstream media news outlets really infuriate me! The housing sector seems like a very simple analysis. There are houses in shadow inventory, houses just starting default, people losing their jobs and INTEREST RATES have not gone up yet ! Sure, the FED could continue to print money to put a “floor” under housing but then, what is the price of oil, food, gas, and raw materials in order to maintain houses going to be? What will the taxes on those houses rise to? Who’s going to buy then? My opinion is there is a 2nd leg down coming. If we get another leg down, that’s a whole new wave of defaults too.. If not, the FED will print away and we’ll get hyperinflation…

    • DRS

      The Fed WILL print again, and again, on and on. Bernanke went to Japan 10+ years ago and told them they should be printing more. How’s that worked? They have over 2x’s the debt our government has and prices there have still not bottomed, after 20 years! The gov. vampire is suking the life out of the economy. They will fight this market readjustment to the bitter end, or till they’re thrown out.
      Just remember what happened to the Soviet Union, coming soon to Japan, if not the US, as well.

  2. George Too

    Greg, MSM had Case on touting a recovering in housing. I guess Dr. Shiller telling the truth was too much for them

    • Greg

      Thank you George Too for the reporting and analysis.

  3. art barnes

    Malaise: A general feeling of discomfort, illness, or uneasiness whose exact cause is difficult to identify. Sounds like the U.S. economy.

  4. Home watcher

    It will be a good time to buy once interest rates have skyrocketed up, people need to stop thinking in terms of a monthly payment, save cash, wait for rates to go up. Then when many people will be unable to afford a payment, because the interest rate is high, the home prices will have to come down. That is when the smart people who have been saving can swoop in and buy cheap.

    • DRS

      Well, around here, there are more than a few below what their materials cost. You can’t do much better than that.
      Also, I’ve seen some torn down in the last few years. People are tearing them down to avoid the taxes! I wouldn’t want to pay $700-$1000 taxes yearly on a bungalow that’s only worth $10-15K. This same bungalow was worth 40-50K 10 years ago, and taxes weren’t as high. The government is sucking the life out of the economy!

  5. AndyB

    It’s really very simple folks. 1) The foreclosure inventory has to clear, 2)the millions of vacant homes have to be sold or bulldozed, and 3)there has to be “real” signs of economic growth and concurrent employment.

    Another issue, but just as important, is the title mess. I personally know of 3 instances where the attorneys (of buyers of foreclosures or short sales) asked the lender for title indemnification from the. All three sales crashed when the lender (BAC-2, WF-1) refused.

  6. Nicole

    Couldn’t agree with you more. It has almost gotten comical, listening to the MSM spin this “recovery.” I am a Realtor, and I get a publication monthly from the National Association of Realtors, and an economist writes an article each month that talks about how great housing is doing…complete with charts and graphs. Until Case-Shiller declares that housing has recovered, it hasn’t. Period. The next bubble to burst will be sub-prime auto loans…instead of giving away housing financing, now it’s auto financing. When is this country going to WAKE UP??

    • Greg

      Thank you for back-stopping this post with real world intel from a professional!!

  7. g.johnson

    the price of private housing needs to drop another 50-75% to be considered affordable by 1950 standards. those years when, as your article mentioned, housing prices did not recover for nearly half a century. so, was 1920 to 1970 fifty years of bad economy? hardly. leave out the first half of the thirties when post depression recovery was taking place and the wwII years, and we had, arguably, the most vibrant economic times the country has ever seen. well at least ever seen since the fed come into being.

    as andyb alluded above, housing will be “correct” when people are gainfully employed and the price of housing does not burden them unduly. and that would mean that your monthly mortgage payment should not exceed 20% of your income.

    nicole’s “real world intel fro a professional” is nothing more than the effects of reality striking one who has made a living driving up prices in order to procure larger and larger commissions on sales. the reality being that prices can only rise so far until the product becomes unafordable. and when price become unafordable, the bubble bursts once again, and the cycle repeats.

    so, once again i find myself trying to convince you that rising housing prices are not a sign of a healthy economy, but, indeed, a flat solid indicator that things are headed in the wrong direction.

    i would venture to say. housing prices on the downswing are more than likely contributing to holding back inflation today. if housing was going up with everything else, we would already be off the cliff.

    ok greg, i take back what i said a few weeks ago about you not being a capitalist, but more an entrepeneur. you have convince me. money is your top priority. how you make it is not all that important. who has to suffer for your profits is no concern.

    harsh? yeah, but i really do think you are better than that. so, we will be talking. 🙂

    thanks again for the work you are doing here. i do hope that this site eventually evolves to cause and effect beyond economics as the financial arena is, in the big picture, more symptom than disease.

  8. The Face Behind the Mask

    Greg – the government and the banks want people to think the housing market is fine/rosy/beautiful. Kind of like Cinderella’s face –

    But when the (Cinderella) mask is finally removed from the housing market, here is how it will look:

    It’s only a mask. The true situation is very ugly.

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