Distressed Property Blog

I heard a man by the name of Steve Richards comment on the role of the media in, what he termed, “the subprime debacle” and its effect on the real estate market. Richards said:

“The real estate market is in a world of hurt thanks to the subprime debacle and the media, which has latched onto this crisis and is milking it for all it’s worth. Every day the media…is coming up with a new angle, a different spin on the story. Please give it a rest. All this media attention has put buyers in a state of gridlock. No wonder homes aren’t selling.”

This got me to thinking about what role the media has played in harming the real estate market? Has the media just been reporting on an already bad situation or have they made a proverbial mountain out of a mole hill? To answer this question, I decided to do a little research of my own, and while I’m not sure I’ve found the answer, I did find something that I thought was remarkable.

Did you know that the word “subprime” was voted the 2007 word of the year?

That’s right—the American Dialect Society voted “subprime” as the word of the year. You may never have heard of the American Dialect Society, but they are a 118-year-old organization made up of linguists, lexicographers, etymologists, grammarians, historians, researchers, writers, authors, editors, professors, university students, and independent scholars.

“Subprime,” the Society explained in its press release (read the full press release here), “is an adjective used to describe a risky or less than ideal loan, mortgage, or investment.” The Society even added a real estate words category to its contest in 2007. “[The real estate category] reflects the preoccupation of the press and public for the past year with a deepening mortgage crisis,” they posited.

The “preoccupation of the press” with a deepening mortgage crisis?

Professor Wayne Glowka, Dean of Arts and Humanities of Reinhardt College, is the chair of the New Words Committee of the American Dialect Society, and he writes about the Society’s choice saying, “When you have investment companies losing billions of dollars over something like bundled subprime loans, then you have to consider whether it’s important.”

With the news media daily awash in bad financial news, it’s not difficult to find stories that tie financial woes back to the subprime mortgage crisis. Everyone knows that. Is this a fact—that all these stories really have their underpinnings in the subprime motgage crisis? Or is this the media painting the story the way they want it to play out?

Jeff Poor of the ultra-conservative NewsBusters, a project of the Media Research Center (MRC) thinks it’s the latter. NewBusters self-proclaimed mission is, of course, to document, expose and neutralize the liberal media bias, and Poor has set his sights, as Steve Richards does, on the media’s role in escalating the mortgage crisis. “Over the past nine months,” Poor wrote in a January blog entry, “whenever there’s any sort of economic turmoil in the world, the point that failures occurred in the subprime housing market is at least mentioned, if not blasted in the headline.”

Poor suggests that this has been music to the ears of the left-of-center presidential candidates, but he contends the so-called crisis is not as widespread as they (and the media) would have us believe. “According to a Dec. 6, 2007, report from the Mortgage Bankers Association,” Poor points out, “subprime mortgages make up less than 14 percent of all mortgages, but 55 percent of all homes that have started the foreclosure process.” And Poor’s got more evidence to support his claim that the media is fueling the crisis. He sites Bloomberg columnist John M. Berry who pointed out last December that Subprime loans represent about an eighth of the value of all U.S. residential mortgages.

Poor contends that the word “subprime” will not be “in the spotlight” forever, and, as Richards points out, maybe then the buyers’ gridlock will also be a thing of the past. It’s hard to say, especially in light of the recent collapse of Bear Stearns and national news sources like the Baltimore Sun reporting, as that newspaper did last week, “Bear Stearns was at the heart of the subprime swamp…It and its partners invested billions in low-grade mortgages as well as better-rated notes that lost value as the market deteriorated.”