'Marketplace' Report: Mortgage Applications Up Despite a slumping economy, mortgage applications are up. What does this mean?

'Marketplace' Report: Mortgage Applications Up

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ALEX CHADWICK, host:

From NPR News it's Day to Day. It doesn't just seem like you've been paying more for things lately, you actually have been. The Labor Department confirms today consumer prices rose three tenths of one percent in last month. Meanwhile, the housing market sank further in its slump. Not especially good economic news. Marketplaces' Amy Scott has been looking at the figures. We've asked her to help us sort through things. Amy, there's a lot of news out today. Let's start with inflation, OK?

AMY SCOTT: Right, well, we've all been watching it happen at the grocery store, at the gas station and though last month's increase in three tenths of a percent is fairly modest. When you look back over a whole year, prices are up about four percent. And that's about twice the level the Federal Reserve is comfortable with. Some things got a little cheaper last month, clothing and cars among them, but utilities, food, airline tickets, all jumped. Energy prices are up 17 percent in the last twelve months. Food prices almost up four and a half percent. And at the same time people have less money in their pockets. A separate report out today showed that higher prices and rising unemployment pushed wages down in March for the sixth month in a row.

CHADWICK: So, what about housing? More bad news there?

SCOTT: That's right. Figures out today show that new home construction in March fell to its lowest level in 17 years. There is an interesting bright spot. Applications for mortgages went up last week, for the second week in a row, thanks to lower interest rates. And a Reuter's Zogby poll out today says that a majority of people think now is a good time to buy a home. But I checked in with Roger Kubarych who is Chief U.S. Economist at UniCredit Global Research. He says that doesn't necessarily mean that people are running out and buying homes, even if they want to.

Mr. ROGER KUBARYCH (Chief U.S. Economist, UniCredit Global Research): It's a better time to buy a home. The affordability index, which is published by the National Association of Realtors, has improved, but it doesn't take account of credit availability. And that's really shrunk.

SCOTT: That means people who don't have stellar credit or a lot of money for down payment or are finding it much tougher to get financing. And even people who are in a good position to buy, may be sitting on the fence right now waiting for the economy to improve.

CHADWICK: You know, you have inflation on one hand, a slowing economy on the other. This harkens back to some grim days earlier in American economic history. How worried are people?

SCOTT: Well, you know, I talked to three different economists this morning and it's rare to hear people sound so gloomy. Most agree that we're in a recession. You know the Fed has been aggressive about lowering interest rates to try to reverse the housing flight and the credit crunch. And Congress is working on its own solutions. People are going to get their refund, their stimulus checks pretty soon. The thing is, only about 30 percent of people are expected to spend theirs. So, it's not clear how effective that's going to be.

CHADWICK: Amy Scott of Public Radio's daily business show, Marketplace. Thank you Amy.

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