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'Marketplace' Report: Dow Soars

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'Marketplace' Report: Dow Soars

Business

'Marketplace' Report: Dow Soars

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ALEX CHADWICK, host:

From NPR News, it's DAY TO DAY.

The Dow Jones industrial average zipped past 13,000 today into new record territory on strong corporate earnings. That's keeping Wall Street happy. Listen to this - Amazon.com doubled its profits, but Boeing and Pepsi, older companies, also did very well.

So people are still buying lots of stuff, but not houses. They're not buying houses. There are reports out in the last couple of days the housing market's still struggling.

MARKETPLACE's Sam Eaton joins us. Sam, just define the housing market for us now. It is not good.

SAM EATON: Alex, today, we got what seemed like some good news from the Commerce Department that new home sales rose - actually rose slightly last month. But Wall Street had expected those numbers to rise two times the reported amount, casting a little cloud over those numbers.

And then there was yesterday's report from the National Association of Realtors that sales of existing homes - or homes that people have already lived in - saw their largest monthly drop since the last major real estate bust in 1989. And then you throw in the subprime lending fiasco and the expected increase in foreclosures over the next year - year or two - and things start looking pretty bleak.

CHADWICK: But housing is such a big part of the economy, or at least we hear it is. Wall Street seems to shrug this off.

EATON: Yeah. Well, like, you know, the big news today is the strong corporate earnings. And as you're saying, people and businesses are still buying lots of stuff, despite the troubled housing market. And some would even argue that that laundry list of bad news for housing I was just talking about is actually good news. It just depends on how you look at the numbers. I talked to University of Maryland economist Peter Morici, and he says to the two housing reports emphasized the number of homes sold. And he says as a barometer of the market, the number of sales doesn't really matter as much as what homes are selling for.

Professor PETER MORICI (Economist, University of Maryland): It's very important to focus on the price of homes. When we look at the stock market, we don't ask how many shares have been sold each day. We look at the price of the shares -likewise, if housing prices are holding up very well.

EATON: So Morici says the average price of an existing home actually rose by about $6,000 between January and March. And for new houses, that price is up about $19,000.

CHADWICK: Well, let me go back to the first question I asked you. Where are we with the housing market at this point? I mean, is the bottom here? Is the bottom in sight? What is it?

EATON: Basically, Alex, if I had a crystal ball, I could tell you that. Really, no one knows for sure. And as I was saying before, there are a lot of alarming trends still at play in the housing market - even builders are feeling less optimistic. One survey showed that homebuilder sentiment fell to its lowest level of the year this month.

And in many areas, you have delinquent mortgage payments on the rise, which is a precursor to more foreclosures. The bottom line is that there's no unified national trend. I mean, you look at Seattle or Houston or New York, things are hot. In places like Detroit where the manufacturing base is struggling, things aren't looking so good.

CHADWICK: Sam Eaton of public radio's daily business show MARKETPLACE, produced by American Public Media. Thank you, Sam.

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