The State Of The U.S. Housing Market
MELISSA BLOCK, Host:
From NPR News, this is ALL THINGS CONSIDERED. I'm Melissa Block.
ROBERT SIEGEL, Host:
And I'm Robert Siegel.
D: For a general housing check-in, I'm joined now by Karl Case, professor of economics at Wellesley College and co-founder of S&P Case-Shiller Housing Price Index. Welcome to the program once again.
KARL CASE: Pleasure to be here.
SIEGEL: And let's start with sales. Demand for purchase loans is down 35 percent over the last month. Were the homebuyer tax credits essentially the housing market's Cash for Clunkers program?
CASE: They're up this month at about 5.7 million. That's a pretty good figure but it's not going to clear the market anytime soon.
SIEGEL: What conceivably might clear the market sometime soon, if interest rates are this low and we're still so far away from that?
CASE: Well, right now it's a big matter of expectations. People make a big purchase when they buy a house, and they have to have some confidence that they're going to have a job and that they're going to be able to pay for it. And particularly with prices falling, they're worried about buying an asset that's going to fall in value. So, household expectations or mood or confidence, it really does play a big role in this market.
SIEGEL: Now, as I said, foreclosures appear to be leveling off. But there are reports suggesting that it isn't because there are fewer borrowers who are delinquent but it's because the banks are moving more slowly to push those borrowers out of their homes.
CASE: But right now, we're seeing inventories of vacant property very, very high and they're not going down. And that can only be due to one thing, that people are not forming households, people are not getting jobs and going out and renting and buying houses. They're doubling up and tripling up and fewer people are coming here. So the existing stock of vacant property is very, very high.
SIEGEL: Now, there's a confusing story in the most recent Case Shiller Home Price Index. Some of the hardest hit cities in the country - Los Angeles, Phoenix, San Diego - all posted price increases compared to a year ago. Does that tell you anything other than prices a year ago were catastrophically low in those places?
CASE: That's the main point is that this - in some of these areas, house prices have fallen 60 percent. And when house prices come down that far and interest rates are low, people are going to start buying them. And as soon as that demand comes back into the market, it results in a stabilization of prices. But you're exactly right that they appear to be going up because they were so low...
(SOUNDBITE OF LAUGHTER)
CASE: ...at the beginning of the period.
SIEGEL: Professor Case, thank you very much for talking with us.
CASE: My pleasure, Robert.
SIEGEL: That's Karl Case, a professor of economic at Wellesley College, co- founder of the S&P Case Shiller Housing Price Index.
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