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Wall Street finally had a good day, and oil prices have finally started to go down. But if you want to know if the economy is really turning around, you can watch one economic indicator, and that's the real estate listings. Real estate led the way down, and experts say real estate will have to lead the way up - or at least stop dropping. NPR's Chris Arnold begins our report by checking one property's curb appeal.
CHRIS ARNOLD: In a middle-class suburb just outside Boston, a yellow Century 21 sign is planted in the little yard in front of a pair of townhouses. The two units are pretty much identical, and one of them sold a few years ago for $426,000. The other one is just going under agreement now, but for about $90,000 less.
Ms. ANITA SHISHMANIAN (Realtor): Such a big difference in sale price over just what's happened the past three years.
ARNOLD: Anita Shishmanian is the realtor for this property.
Ms. SHISHMANIAN: Just the skepticism in buyers nowadays. You know, they're still thinking that we haven't bottomed out. But I think until we really see some pluses, like no banks closing and a little more certainty in the stock market and so forth, I think that we're still going to have a problem with pricing.
ARNOLD: Getting this housing problem sorted out is key to turning the economy around. Federal Reserve Chairman Ben Bernanke was very clear about that when he spoke to lawmakers on Capitol Hill this week.
Mr. BEN BERNANKE (Chairman, Federal Reserve): I think were it to happen that there would become a general view that the housing situation had stabilized, I think you would see actually a very strong bounce back in the economy and the financial markets. And it's the uncertainty about when that happens that remains a problem.
ARNOLD: One of the issues here is that people's biggest asset - their house -is falling in value, and that makes them nervous. William Wheaton is the housing economist at MIT.
Professor WILLIAM WHEATON (Housing Economist, MIT): They're not quite sure what's happening in the world, and then they spend less. And spending's a very important part of GDP growth. The construction industry is also completely in the tank.
ARNOLD: That costs the economy a lot of jobs, but right now there are several million homes sitting unsold. And that so-called inventory of homes is basically glutting the market and pushing prices lower. So how do you change that?
Prof. WHEATON: You turn it around by reducing the inventory and getting people to buy again. And the main factor in all of that, a huge factor in all of that, is what's going on with foreclosures.
ARNOLD: Wheaton says right now, some 700,000 homes a year are being foreclosed on and sold off.
Prof. WHEATON: And those are all homes that are being dumped on the market, and presumably people being displaced. And that negative factor has just got to stop.
ARNOLD: Realtor Anita Shishmanian says foreclosures and short sales, which are similar, also push prices down in the neighborhoods around them because those homes get sold on the cheap.
Ms. SHISHMANIAN: When we then need to go to do a market analysis on a comparable property, we're looking at these short sales that closed and we're having to use those as comparables.
ARNOLD: Lawmakers in Congress are on the verge of passing some major housing legislation. A big part of it is a foreclosure prevention plan. It would offer government guarantees to help some homeowners refinance into more affordable loans. It's estimated the program could help prevent several hundred thousand foreclosures.
William Wheaton thinks it would've been nice if this happened six months ago, but it's still much needed.
Prof. WHEATON: Even if it helped just a couple hundred thousand people, you move them from units foreclosing into the category of units worked out, that would be a big help, actually. That would actually make quite a difference in the market.
ARNOLD: Wheaton says already, the number of homes getting sold every month has leveled off. It's not dropping anymore, and that's a good sign. So he says once the foreclosure numbers start improving, positive news like that could be a signal to buyers, and then:
Prof. WHEATON: Once people sense that the bottom has been reached, what you'll see is you'll see a big increase in sales, because there'll be a lot of people who will step in and buy.
ARNOLD: Not that that'll push prices up any time soon. But with fewer homes for sale, the market could stabilize, and that would be good for the economy and make Wall Street a lot less jittery.
Chris Arnold, NPR News, Boston.
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