Wednesday, August 24, 2005

Spin Art

The Mortgage Bankers Association in Washington, D.C., released a study of the housing and mortgage markets this week. My favorite take on it is in The Milwaukee Journal Sentinel story "Bankers group debunks housing bubble." Talk about accentuating the positive, this story deserves some kind of dubious achievement award just for the artful spin:
Most homeowners should be able to withstand soft market conditions, the analysis found. That's because:

• An estimated 35% of homeowners have no mortgage debt of any type.

• About 51% have a fixed-rate mortgage, immune from rising interest rates.

• The remaining 14% have adjustable-rate loans that could veer higher, but about half are held by high-income borrowers or borrowers with years of successful experience paying a varying interest rate.

However, 7% of American homeowners have adjustable-rate mortgages and no experience in dealing with suddenly higher payments, Duncan said.

"It's not clear how they'd react," he said.

Not clear how they'd react? What does that mean? How many choices will be available to them? There's foreclosure, bankruptcy, jumping off a cliff...

And who said homeowners without any mortgage debt had anything to worry about regarding the housing bubble? That's like saying that people who don't drive cars don't have to worry about road rage. Of course they don't.

It's probably just laziness on the part of reporters, or maybe it's overworked editors who mistakenly cut out important things that we never see. Regardless, stories like this are a waste of valuable newsprint space. They kill trees unnecessarily to state the obvious. And, what's worse, this story is about a substantial study by the MBA and yet it quotes a single source — Doug Duncan, the chief economist of the Mortgage Bankers Association in Washington, D.C. The story challenges none of what Duncan has to say, nor does it appear that the paper even tried to reach a critic, or an academic who might offer another point of view. I know Doug's a nice guy, very intelligent and articulate, but this story isn't journalism. It's public relations.

Here's the link to the pdf file cointaining the full MBA study.

— The Boy in the Big Housing Bubble