Can Low Rates Spark A Hot Housing Summer?

In recent days, home mortgage interest rates have ticked up very slightly but are still quite low, well below 5 percent. This spring's low rates have helped boost mortgage applications, both for refinancing and purchases. NPR's Chris Arnold reports on the outlook for the housing sector this summer, and the industry's one bright spot: cheap mortgages.

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This is WEEKEND EDITION from NPR News. I'm Scott Simon.

Every spring since 2007, real estate agents have hoped maybe this will be the summer when the housing market starts to really rebound. So far, that hasn't happened. Still, some economists say that with interest rates once again low, may not be a bad time to buy. NPR's Chris Arnold reports.

CHRIS ARNOLD: So far, despite those low interest rates, home sales are very sluggish - below last year's levels. Home construction is at a standstill. It's been 60 years since so few homes were being built in this country. And meanwhile home prices have been slipping a bit lower again. But all that also means there are a lot of homes for sale and some people are finding pretty good deals.

Ms. JEAN WITT: I'm a teacher - 7th grade middle school.

Mr. WILLIAM WITT: I'm a bartender. It's a family owned tavern. Been there 57 or 58 years.

ARNOLD: Oh, that's cool.

In the Boston suburb of Stoughton, Massachusetts, William Witt and his wife Jean are doing a final walk-through of a house. It's actually just an hour before the closing when they'll buy it and get the keys. It's a beautiful spring afternoon and the couple's walking through the living room and out a sliding glass door onto the 20-foot-long back deck.

(Soundbite of door sliding open)

Mr. WITT: I'm thinking where my grill's going...

(Soundbite of laughter)

Mr. WITT: ...that I bought the other day.

ARNOLD: You're getting ready to barbecue out here.

Mr. WITT: Oh, yes. I can't wait.

ARNOLD: It's a three-bedroom ranch house with a big yard, and the couple says the price seemed pretty reasonable.

Mr. JOHN BRISTOL (Realtor): We were asking $289,000 and they paid $280,000.

ARNOLD: That's the realtor selling the house, John Bristol. He says during the housing boom this house would have sold for much more.

Mr. BRISTOL: If you want to go back 5 years this probably would have sold for about $350,000.

ARNOLD: And after the home inspection, the Witts were able to get the seller to install a brand new oil tank for the furnace and make some other updates. You didn't see too much of that during the housing boom.

But the realtor John Bristol thinks the glut of foreclosures and ongoing high unemployment is still taking the wind out of the sails of most homebuyers.

Mr. BRISTOL: the way I look at it is the emotion is gone in buying a house. Meaning, there's no urgency to buy that particular house that particular house that you see on the market 'cause another one will come up the next week. And what happens is people spent 12 months to 18 months looking for a house.

ARNOLD: In fact, there have been recent news articles that maybe something fundamental in the housing market has changed, that maybe the American dream should no longer involve home ownership. Perhaps it doesn't make financial sense the way it used to. But as with most proclamations that the world has suddenly changed, this one too is probably wrong.

And that kind of talk is already getting kind of annoying to some economists.

Professor KARL CASE (Harvard University): Oh yeah, I do go a little crazy about that.

ARNOLD: Carl Case is a housing economist at Harvard University. He says it is true that home prices might not rise much for a long time. But he says it's important to remember that there are still all kinds of other reasons that it makes sense for many people to own a house, especially if they plan to live there a while and they lock in today's very low fixed interest rates.

Mr. CASE: The payment doesn't go up ever when your rent would. You're accumulating equity even if it doesn't appreciate, as long as it holds its value.

ARNOLD: In other words unlike renting, over time you're going to own a big chunk of that house, if not all of it. And that sort of forced savings and equity building has created nice nest eggs for millions of Americans for generations. And from that perspective, Case says it still very much makes sense to own a house.

Chris Arnold, NPR News, Boston

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