ROBERT SIEGEL, HOST:

From NPR News, this is ALL THINGS CONSIDERED. I'm Robert Siegel. Another sign today that the U.S. economy is starting to mend, consumer confidence jumped to its highest level since April. But the housing market isn't going along yet with that cheerier mood: Home prices were down 3.4 percent for the year as of October. That's according to a new report released today. Housing has been at the center of the country's economic troubles since 2007, but as NPR's Chris Arnold reports, the early stages of a recovery just might take hold in the New Year.

CHRIS ARNOLD, BYLINE: In the movie "Groundhog Day," Bill Murray keeps waking up to live the same day over and over again. And President Obama might feel the same way about the troubled U.S. housing market. In 2009, the president spoke about his plan to prevent foreclosures.

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PRESIDENT BARACK OBAMA: The American dream is being tested by a home mortgage crisis that not only threatens the stability of our economy but also the stability of families and neighborhoods.

ARNOLD: But despite all kinds of federal initiatives, the housing market still hasn't seen a real turnaround, which the president talked about this past summer.

OBAMA: This is the biggest headwind on the economy right now, is the housing market.

ARNOLD: Susan Wachter is a professor of real estate and finance at the University of Pennsylvania's Wharton School.

SUSAN WACHTER: The housing market certainly still weighs on the growth prospects for 2012. It is part of the reason why the recovery is so slow and plodding.

ARNOLD: A house is the biggest single investment or purchase for most Americans. So with millions of homeowners underwater, that is owing more than their house is worth, that just have to put a damper on people's spending and confidence. There's also hundreds of thousands of fewer construction jobs and even more related jobs. And so Wachter says all of that gets felt in the nation's gross domestic product, or GDP.

WACHTER: It means the growth is maybe 1 percent slower than it otherwise would be. So instead of perhaps three and a half percent, we see two and a half percent. That's a big deal difference.

ARNOLD: Still, there is at least one sort of bright spot to talk about here, and that is for anyone looking to buy a home. Mark Zandi is the chief economist at Moody's Analytics.

MARK ZANDI: House prices have fallen about 35 percent from the peak, the peak being just about six years ago. Because of that decline, single-family housing is really quite affordable by historical standards in most markets.

ARNOLD: Also, interest rates are lower than they've been in decades. Still, while the table is being set for a recovery, the party hasn't really gotten started yet. Home sales were up 4 percent last month, but Zandi says that they've been pretty much just bouncing along the bottom without really gaining much traction. And a big reason for that is that home prices are still drifting a bit lower, and that makes people nervous about getting into the market. And it also keeps lenders nervous about loaning people money to buy houses.

ZANDI: I do think lenders are very cautious. In many parts of the country, it's still quite difficult to get a loan.

ARNOLD: So until prices stop falling, buyers and bankers will be nervous. And one thing that keeps pushing down prices is the ongoing foreclosure mess. Millions of people have already lost their homes, and millions more are delinquent on their mortgages.

BRUCE MARKS: There are so many foreclosures and pending foreclosures out there. This is a huge problem.

ARNOLD: That's Bruce Marks, who heads up the Neighborhood Assistance Corporation of America. It's a nonprofit group that helps people to avoid foreclosure. And heading into the New Year, he says, that his group has found hundreds of thousands of more people who should qualify for federal programs to help them keep their homes.

MARKS: These are families that are determined to keep their home that we have to find a solution for.

ARNOLD: Marks says there are still all kinds of problems. But groups like his, along with members of Congress and prominent economists, have been pushing through changes and improvements to existing programs, and so some hope to see more people being able to refinance or to hang onto their houses other ways in the New Year. Chris Arnold, NPR News, Boston.

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