Housing Data Highlight Weakness In Sector
MELISSA BLOCK, host:
From NPR News, this is ALL THINGS CONSIDERED. I'm Melissa Block.
There is trouble on the home front. Sales of existing homes fell in January by 7.2 percent, more evidence that the U.S. housing market is stubbornly weak. The decline follows an even steeper drop earlier this week in new home sales. Bad weather and a bad job market are partly to blame. The collapse of the real estate market drove the country into recession and economists say housing must find some traction for a real recovery to begin.
NPR's Chris Arnold reports.
CHRIS ARNOLD: There's nobody hoping for a recovery in housing as much as home builders. Construction and related firms have laid off hundreds of thousands of workers. The number of homes getting built hasn't been this low in the U.S. in more than 50 years.
Richard Dugas is the CEO of Pulte Homes, one of the largest home builders, and he's not seeing the clouds parting just yet.
Mr. RICHARD DUGAS (CEO, Pulte Homes): I'd love to tell you we're going to build a lot more homes, but it's going to depend on demand. I have to wait and see what's going to happen on the sales environment.
ARNOLD: And for two straight months now, those sales of both new and existing homes have been disappointing. Things had been looking a bit better for housing. Sales were picking up. Prices seem to have been leveling off in many areas. So, Dugas actually isn't that alarmed by these latest numbers.
Mr. DUGAS: I think there's a number of things going on. I think overall weather has certainly played a factor in January, as well as what I would call the hangover from the tax credit that was going to expire at the end of November, that of course has been extended.
ARNOLD: Dugas is talking about a federal tax credit for homebuyers. Many people were scrambling to buy a house ahead of that November deadline that boosted sales. And so now he says that we're seeing an understandable slump. But with the tax credit extended, Dugas expects that that will support sales and create a more stable market through 2010.
Mr. DUGAS: Relatively stable, perhaps slightly improving from 2009. But definitely I'm not projecting a large rebound. There's too much foreclosure inventory that still has to be worked through the system in the next couple years.
ARNOLD: In other words, millions of foreclosed homes getting dumped on the market means too many homes for sale and that's pushing down prices. About 40 percent of all home sales right now are these so-called distressed sales. And there's another problem for the housing market going forward. Jon Shibley runs Lenox Financial, a mortgage company in Atlanta.
Mr. JON SHIBLEY (President and CEO, Lenox Financial): What I've been seeing based on our customer profile is that 75 percent of the people that contact us really owe more on their houses than what their houses are worth and they don't even realize it.
ARNOLD: Shibley is seeing a ton of people right now who are underwater, meaning they owe 10 or 20 or $100,000 more than their house is really worth. Some economists say 30 percent of all Americans with mortgages are underwater. Shibley says when people find that out, they often decide not to buy because they take a big loss selling their old house.
Mr. SHIBLEY: They're going to have to write a check just to sell their house. So, the opportunity for someone to come in and say hey, you know what, I've got 100,000 equity in my house, I'll go borrow 50,000 of that and then go buy a great house. You know, that doesn't exist either.
ARNOLD: One big question for the coming year is how many of those underwater borrowers will decide to just walk away from their homes. Still, Richard Dugas the home builder is optimistic that the government's support for low interest rates combined with lower prices will ultimately get more people to buy homes.
Mr. DUGAS: Now is a good time. I don't know when we're going to see this combination of low interest rates and low prices again. So it clearly is a time that a lot of value is being offered.
ARNOLD: Of course, for people to take advantage of that, they'll need a job and somebody will have to give them a mortgage. And in this economy, both loans and jobs can be extremely hard to get right now.
Chris Arnold, NPR News.