'Marketplace' Report: Demand for Foreclosed Homes
MADELEINE BRAND, host:
From NPR News, this is Day to Day. Housing prices are still plummeting. A new survey shows that over the last year prices are down by the biggest margin in more than 20 years. The Standard and Poor's/Case-Shiller Index tracks the prices of homes in big metro areas across the U.S. Marketplace's Bob Moon has been studying the numbers. He's here now. Bob, it sounds pretty bleak. Which parts of the country are being hit the hardest?
BOB MOON: Well, you know, just the overall number is bad enough, and the 20 major U.S. Metro areas that are tracked by this index, prices have plunged 10.7 percent over the past year. But as you suggest, the damage is a lot worse in certain areas. It's gotten really painful if you're a homeowner in Los Vegas and Miami. Those prices have fallen the most of any region by 19.3 percent year over year, and double digit drops have also been recorded in Phoenix, San Diego, and here in Los Angeles.
BRAND: Yesterday, though, there was a bit of optimism. There was report that showed that home sales actually increased last month.
MOON: Yeah, and some of the experts say that we can expect that there will be an uptick in sales, particularly of these existing homes, because prices are going down now, and that's going to reflect some interest on the part of buyers. On the other hand, it's going to take a long time to work through this backlog, this oversupply of homes that we have. And that's been going up more and more as we've seen more foreclosures put more homes back on the market. Lehman Brothers Holdings is among the investment banks that are forecasting home prices as measured by this index are going to decline another 10 percent, and it predicts new home sales will bottom out in the middle of this year. Existing home sales and housing starts, they're going to reach a trough maybe in the third quarter of this year. Now, it's not all bad news, I have to say here. We've been seeing interest rates decline, and when I spoke to Greg McBride over at bankright.com, he's hopeful that's going to mean fewer foreclosures than there might have been.
Mr. GREG MC BRIDE (Financial Analyst, Bankright.com): The biggest beneficiaries of the Federal Reserves repeated interest rate cuts will be home owners that have adjustable rate mortgages due to reset in 2008.
MOON: He says some monthly payments that might have gone up as much as 400 dollars a month that they reset last year, may go up only 50 bucks a month on say a 200,000 dollar loan that's resetting.
BRAND: OK, so, not all bad. This particular survey, the Standard and Poor's/Case-Shiller Index, does that one give any sign that the housing market would be recovering this year or anytime soon?
MOON: It doesn't, as a matter of fact. The author of this study says that it shows that we're still very deep in this housing correction.
BRAND: OK, thank you Bob. That's Bob Moon of Public Radio's daily business show, Marketplace.
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