ALEX CHADWICK, host:
From NPR News, it's DAY TO DAY.
There is actually a some good news about housing today. Sales of previously owned homes rose slightly in November, those figures just out. MARKETPLACE's Sam Eaton joins us now.
Sam, are people popping the champagne corks early on this?
SAM EATON: Well, Alex, the National Association of Realtors is at least putting the champagne on ice. The industry group says the slight rise in sales for previously owned homes shows the housing market is finally stabilizing, which is the first sign of a recovery.
Now, that of course is an interpretation of the numbers, Alex, and one that's coming from an organization known for being somewhat of a cheerleader for the housing market, since its members are made up of realtors who've been losing a lot of money in the slump.
Now, for a more sober view, I talked to Wellesley housing economist Karl Case. And he says the slight uptick in sales hardly offsets the fact that numbers are down 20 percent from the year before.
Professor KARL CASE (Wellesley College): This subprime thing hasn't worked itself out yet. There's been a lot of property that has to be liquidated. And as long as those inventories are up and the new home sales were down, it's not an indication that the market is coming to any kind of a quick stabilization.
CHADWICK: So how long do we think this is really gong to take before you can hope to see a turnaround in the housing market?
EATON: Well, Alex, as Case was saying, inventories of unsold homes has to come down first. And for that to happen, prices have to come down as well, especially in places like California and Florida. Nationally, the median price of an existing home dropped 3.3 percent from a year ago. Even the Realtors Association says prices have to come down further in order to entice buyers back into the market. But that's tricky since sellers aren't especially willing to cut their prices. And that's also serving to slow down any turnaround in the market since more houses are sitting unsold.
Now, you add it all together and throw in last week's dismal numbers on new home sales and many economists are predicting the housing slump will continue at least through the coming year and into part of 2009.
CHADWICK: You have to wonder about the effect on the overall economy and the R-word, which people do talk about for next year - recession. What are prospects?
EATON: It's definitely a possibility, Alex. Last spring pretty much no one was predicting a recession. Now the consensus among economist is for a 50-50 chance. The reason for that lies mostly with those dismal new home sales out last week. They decrease by nine percent to the lowest level since 1995. And since housing production makes up a huge part of the gross domestic product, that decrease hurts. One bright note, though, is that the average 30 year mortgage edged down in November to about 6.21 percent, and the Realtors Association says if the Fed continues to cut interest rates all those people waiting on the sidelines to buy homes could jump back into the market and initiate a recovery.
CHADWICK: Thank you, Sam.
Good news, I guess, at the end on 2007, or at least the prospects of the possibility.
Sam Eaton of public radio's daily business show MARKETPLACE from American Public Media.