FARAI CHIDEYA, host:
Back now with DAY TO DAY. I'm Farai Chideya.
More evidence today that the red-hot housing market is beginning to cool down. The National Association of Realtors reports just under seven million existing homes were sold in November. That's down 1.7 percentage points from the previous month, the lowest level of sales since March. Joining us is John Dimsale from "Marketplace."
John, even with this recent slowdown, the housing market has had a good year, hasn't it?
JOHN DIMSDALE ("Marketplace"): It sure did, Farai. Home sales will set a record for the fifth year in a row, and prices have been booming. You know, the housing market is a closely watched indicator of the entire economy. It means construction jobs and sales of materials and furniture and appliances. Plus, home ownership is a big factor in consumer confidence. That's why there's real concern about prices coming down too quickly.
CHIDEYA: So let me ask you this. What are the latest numbers saying? Are we looking at a house bubble that's about to burst?
DIMSDALE: No, at least not yet. Today's drop in existing home sales was only a little weaker than expected. A week ago, we saw a bigger drop, 11 percent, in the sales of new homes. There's now a five-month supply of houses for sale, and that's the highest inventory since 1986. And the number of days that the average home for sale stays on the market is going up. But so far, this could be a soft landing for the high-flying market, and economist David Wyss at Standard & Poor's thinks the gradual decline will continue.
Mr. DAVID WYSS (Economist, Standard & Poor's): We expect housing starts and sales to soften next year. Mortgage rates are up, they're going to go up farther, and that's going to slow down the housing market. And when you slow down the housing market you slow down things like appliances, furniture, rugs, carpets, all those other things that your wife insists on buying as soon as you move into the new house.
CHIDEYA: David Wyss talked about higher mortgage rates. What's the outlook for home prices?
DIMSDALE: Well, so far the sales slowdown hasn't taken much of an edge off of rising prices. The median cost of an existing home was $215,000 in November. That's up more than 13 percent over the year. But price increases have been slowing a bit in recent months, and mortgages are getting more expensive. But you have to keep that in perspective. Research by Economy.com finds that a family earning the median national income buying a median-priced house would spend 22 percent of its yearly income to buy that home. It only took 17 percent of a family's income in the late '90s. But you go back 20, 25 years when mortgage rates were in the double digits and a house cost 30 percent of family income.
Today on "Marketplace," we have what should be good news for oenophiles. A bumper crop of California grapes is likely to leave US wineries drowning in their product.
CHIDEYA: John Dimsdale of public radio's daily business show "Marketplace," produced by American Public Media.
DIMSDALE: You're welcome.
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