Housing Market Fake-Outs Stump Economists More than six years after the housing crash, the housing market may be better-than-dismal, but the slog back to normal is still disappointingly long and slow.
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Housing Market Fake-Outs Stump Economists

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Housing Market Fake-Outs Stump Economists

DON GONYEA, HOST:

This is WEEKEND EDITION from NPR News. I'm Don Gonyea. More than six years after the housing crash, economists are still trying to figure out what exactly is going on with the housing market. Many feel it's too hard for people to get mortgages. They say that's partly why sales are sluggish.

At the same time, wealthier people are buying houses with all cash. Meanwhile, new home construction remains stubbornly low. NPR's Chris Arnold reports.

CHRIS ARNOLD, BYLINE: In recent years, many homebuyers have been throwing down cold hard cash for the entire purchase. Some are baby boomers who sold a bigger house and they're downsizing. Some are investors. Other buyers are from outside the U.S. Daren Blomquist is the vice president of RealtyTrac, which has a study out about these cash buyers.

DAREN BLOMQUIST: The top of the list, in terms of cash sales in the first quarter, was Florida with 64 percent of all sales going to cash buyers, followed by New York - 59 percent, Alabama - 56 percent.

ARNOLD: Actually, though, many housing economists think that those numbers in that study are overstated, which suggests that even some of the experts aren't really certain about just what's happening with this housing market.

CHRIS HERBERT: Where are we in this recovery is a key question.

ARNOLD: That's Chris Herbert. He's the research director at the Harvard Joint Center for Housing Studies, which just released its own big report on the overall state of the housing market.

HERBERT: Housing really traditionally plays a really strong role in driving the economy out of a recession. And here we are six years later and still yet to do that. And the economy, as a result, I think, is still not really on very strong footing.

ARNOLD: So where we are is a key question. But that's been much harder to figure out in this recovery.

HERBERT: Over the past year, I would say that the housing market threw us a kind of double head-fake.

ARNOLD: The first head-fake was last spring and summer. Interest rates had fallen to very low levels. And that helped to juice up the market. Sales were picking up. Home prices were rising. And it finally looked like the housing recovery that the economy had been waiting for.

HERBERT: And I think that led to expectations that maybe housing really was starting to find another gear and play that role.

ARNOLD: But then interest rates rose a bit, and things cooled off. And then the second head-fake - Herbert says, the long cold winter really put a damper on housing and made things look even more dismal than they actually were. And now Herbert thinks the market's settling back into it's better-than-dismal but still disappointingly long and slow slog back towards something like normal.

HERBERT: The steady, slow recovery - the key thing for the housing market is jobs. Jobs translate into growth in the housing stock. It's still pretty anemic. And so I think as long as the economy follows that path, so will the housing market.

ARNOLD: Also speaking at the event at Harvard, where the report was released, was Mike Calhoun. He's the president of the Center for Responsible Lending. He thinks another thing holding back the housing market is that credit is still too tight. Lenders are being too cautious.

He thinks that that's keeping a lot of first-time home buyers out of the market. And at a time when, with interest rates still pretty low, owning a home, he says, in most places, is affordable.

MIKE CALHOUN: And so one of the ironies is it's a good time for people to buy houses, but they can't get the credit.

ARNOLD: And some people who put in an offer on a house but then are waiting to get approved for the mortgage, they're losing out to those people who can just put down cash and buy the house outright. And that's doubly frustrating for people who want to buy but who are being forced to rent because the cost of renting has been going up in recent years. Meanwhile, incomes have been stagnant. Lisa Sturtevant is with the D.C.-based Center for Housing Policy.

LISA STURTEVANT: So what we used to think about affordability as something that affected low-income families, it's really moving up the economic ladder where middle-class families are having a hard time finding housing they can afford.

ARNOLD: The report found that half of all renters in this country now pay what the federal government considers unaffordable rents - more than 30 percent of their gross income for housing. And more than a quarter of all renters are paying more than half their income on rent. Chris Arnold, NPR News, Boston.

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