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Home Publications Blogs Beat the Press NPR Tells Listeners That House Prices Have Stabilized

NPR Tells Listeners That House Prices Have Stabilized

Friday, 06 August 2010 04:11

This exciting tidbit was conveyed in the lead-in to a story on the failure of the Obama administration's mortgage modification program (HAMP). That is a surprising assessment given the fact that purchase mortgage applications have dropped by more than 30 percent from year ago levels since the end of the homebuyer's tax credit on April 30th. Unless 30 percent fewer people feel like selling their homes in 2010 than 2009 (a relatively weak period for house sales), then house prices will be headed sharply lower. (This is based on a complex technical process known as "supply and demand.")

The issue of the direction of house prices is actually very relevant to the topic. The housing bubble has not fully deflated in many areas of the country. This means that government efforts to keep people in their homes are likely to still leave many people underwater. In other words, by design, the Obama program will be paying servicers and investors money for mortgage modifications that still leave homeowners with no equity in their homes. This makes HAMP a good mechanism for getting money to banks, but a very way to help homeowners.

It is not possible to assess the merits of this sort of mortgage modification program without a serious assessment of the future course of house prices. NPR excluded such a discussion with the unsupported assertion in its lead-in.

Comments (1)Add Comment
Free Marketeers Shut Down Free Markets
written by izzatzo, August 06, 2010 6:12
The underlying message is that the housing market can't really be working to restore itself to "normal" lower prices, because that would directly contradict the broader message of the financial and real estate industry, thus the counter backstory message that the market has worked, but to stabilize prices, and is not expected to reduce them further.

The news story itself is about a consultant booted out for whistleblowing on servicers and investors who get the financial aid rather than homeowners, which agrees with Baker. But note the emphasis on government failure for the usual reason, observable corruption as reported by the consultant. Again, blame is placed on the government in an entirely different way than if HAMP was presented as flawed because of pressure to ignore falling prices in the housing market.

The news is not about market failure or government failure per se. It's manipulated to cater to whether concentrated interests in the private sector benefit from either one. In this case, the "free housing market" is not producing price changes in the desired direction, which is conveniently misreported to maintain its status as a "free market" which prouces "stabilized prices". From there, the usual story can be developed on how the government failed via intervention into "free markets".

It's like a mirror image of reporting on Social Security. When a government program is clearly superior to private markets, it's the one most reported as a failure because it heavily restricts the predatory power of the concentrated private sector. But when a private housing market actually starts to work like a free market should, to correct itself to lower price levels, suddenly the same crowd turns against the result with propaganda designed not only to counteract the perception that prices are falling, but to intervene and keep them from falling on their behalf.

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About Beat the Press

Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.