Housing Market Shows More Signs Of Life
CELESTE HEADLEE, HOST:
This week, the U.S. housing market showed a few more signs of life. New reports show home sales and prices rising. And those gains have been coming despite the recent rise in interest rates. Meanwhile, President Obama spoke out about changes he'd like to see in the mortgage market. We're joined now by NPR correspondent Chris Arnold who's been keeping an eye on all of this. Hi, Chris.
CHRIS ARNOLD, BYLINE: Hey, Celeste.
HEADLEE: So, first of all, Chris, give me an idea of how strong this rebound in housing, both prices and sales, really is.
ARNOLD: Well, it's pretty strong. If you look at sales, they have been rising. And if you look at prices, they're up 12 percent from a year ago. That's very solid, as a national number. If you look at numbers that really tanked during the downturn, like Sacramento, California, prices there are up about 40 percent from a year ago. Las Vegas, Reno, Atlanta - all those are up more than 30 percent. Now, they're still below sort of the crazy peaks of the housing bubble, but still in a year, those are very solid price increases.
HEADLEE: And what's causing all of this?
ARNOLD: For one thing, the economy's better. So, more people have jobs, and when more people have jobs they go to buy more houses. But also the supply of homes in places that people really want to buy, the supply is tight. So, if a house gets foreclosed on in a decent neighborhood, investors snap it up very quickly. Also, a lot of people still owe more on their mortgages than their house is actually worth and so then they can't sell their house, and that keeps houses off the market. And then we just haven't been building that many homes. Home construction has been very, very low. So, all of that adds up to very tight supplies.
HEADLEE: So, let's talk about Fannie Mae and Freddie Mac for a minute, since the president spoke about that this week. These, of course, are the big government-controlled companies. They guarantee home loans. They basically help the mortgage market function in the U.S. and make home ownership possible for many Americans. They made huge profits this week. How'd they do that?
ARNOLD: Right. So, just to recap a little and remind people. So, Fannie and Freddie have been a big part of the American dream and the middle class being able to buy a house for a long, long time. And then the housing market collapsed, they made a bunch of bad investments and he government had to bail them out to the tune of $187 billion. That earned them a bunch of enemies in Washington. And so that was sort of the story for a long time. But now with housing market coming back, Fannie and Freddie are making a lot of money again. Together they reported $15 billion in profits in just the past three months. And so their resurgence here has got folks in Washington, legislators in Washington, trying to come together with a compromise over what to do with Fannie and Freddie.
HEADLEE: But Fannie and Freddie are such big parts of making homeownership possible for Americans and if they're making so much money, why would the president say he wants to close them?
ARNOLD: Well, the question is what to do next going forward from here, and there's three schools of thought. So, the conservatives, some Republicans, they want to just get rid of Fannie and Freddie and blow them up and let the market sort it out. Then on the left, there are some Democratic lawmakers who want to keep Fannie and Freddie but turn them into fully public utilities. The compromise would be to get rid of Fannie and Freddie but still keep the government in housing to some degree to guarantee that people could get stable, affordable 30-year fixed-rate mortgages, all that good stuff, for the middle class. That's what he president's throwing his weight behind. But details are still being figured out.
HEADLEE: And yet that would require a big piece of legislation with a lot of votes and there would be a question of whether or not Congress could get that completed. What do you think?
ARNOLD: Well, if I was a betting person, I would bet probably that nothing's going to happen. You know, there's a big bipartisan proposal coming together, the president's behind it. But if Congress really can't get together on it, the smart money seems to be on that Fannie and Freddie will probably just continue to go forward in this limbo state for a long time.
HEADLEE: That's NPR correspondent Chris Arnold. Thanks, Chris.
ARNOLD: Thanks, Celeste.