Will Bailout Help The Real Estate Market? Two widely watched monthly reports on home sales are due out this week. Many are asking if the financial rescue package for Wall Street will help stabilize the housing market. Even with prices in freefall, many potential buyers are staying away.
NPR logo

Will Bailout Help The Real Estate Market?

  • Download
  • <iframe src="https://www.npr.org/player/embed/94885179/94885166" width="100%" height="290" frameborder="0" scrolling="no" title="NPR embedded audio player">
  • Transcript
Will Bailout Help The Real Estate Market?

Will Bailout Help The Real Estate Market?

  • Download
  • <iframe src="https://www.npr.org/player/embed/94885179/94885166" width="100%" height="290" frameborder="0" scrolling="no" title="NPR embedded audio player">
  • Transcript

MADELEINE BRAND, host:

Back now with Day to Day, I'm Madeleine Brand. At the root of the financial crisis on Wall Street is the home foreclosure crisis. So, what is going on in the real estate market? Numbers come out later this week for existing and new homes. The big question, will the federal government's financial rescue package be enough to stabilize the housing market? Marketplace's Nancy Marshall-Genzer is here now. And Nancy, what are economists predicting about this week's numbers?

NANCY MARSHALL-GENZER: Well one firm, Global Insight, expects that both existing home sales and new home sales are going to drop by about two percent. But Madeleine, we have to remember the numbers being released this week are from August, and that was before the government's rescue package was announced.

BRAND: So, do they think that this rescue package will help housing sales pick up?

MARSHALL-GENZER: Well, possibly, because for one thing mortgage rates are down. Global Insight economists say the lower rates could, quote, "support existing home sales this month". That's pretty vague, but that's about as specific as they're willing to get.

(Soundbite of laughter)

MARSHALL-GENZER: But they think new home sales are going to continue to drop through the end of this year because the market is still saturated with existing homes. Brian Bethune is Global Insight's chief U.S. economist, and he says people filed more mortgage applications this month because of the lower interest rates, but...

Mr. BRIAN BETHUNE (IHS Global Insight): The question is how many of those will be approved.

(Soundbite of laughter)

Mr. BETHUNE: With our friendly lending institutions having tightened up on lending conditions so severely that you may not get the kind of credit that you're looking for.

MARSHALL-GENZER: Of course the idea behind the government's financial rescue package is that it would ease the credit crunch. The government would buy troubled assets that banks are holding on their books, and we're talking about subprime loans in various forms. So, banks would get those troubled loans off their books, that would help them attract new investment, and then banks as a whole would be more likely to lend each other money.

BRAND: So, the million dollar question, or maybe the 700 billion dollar question, when would this credit crunch start to ease?

MARSHALL-GENZER: It is the 700 billion dollar question, Madeleine. No one wants to say for sure. One analyst - Morningstar analyst Eric Landry did say that we're probably going to have several more weeks of weak home sales.

Mr. ERIC LANDRY (Analyst, Morningstar): We're dealing with a pretty sick patient here, and these things don't turn around on a dime. So I think for anyone to expect this to be, you know, in effect over the next month or two I think is reaching.

MARSHALL-GENZER: But Landry did say the worst might be behind us because housing prices aren't falling as fast as they were last winter.

BRAND: OK, Nancy, and this bailout plan, has it eclipsed the election talk in Washington?

MARSHALL-GENZER: I don't know if I would go quite that far, Madeleine. But it is definitely the talk of Washington today. President Bush issued a statement, members of congress are certainly speaking out, and some are very cautious. They remember the savings and loan crisis in the '80s. They keep reminding us that it was followed by about three years of recession. So keep that in mind.

BRAND: OK. And we will have some talk about the presidential politics coming up. Thank you, Nancy. That's Nancy Marshall-Genzer of public radio's daily business show, Marketplace.

Copyright © 2008 NPR. All rights reserved. Visit our website terms of use and permissions pages at www.npr.org for further information.

NPR transcripts are created on a rush deadline by Verb8tm, Inc., an NPR contractor, and produced using a proprietary transcription process developed with NPR. This text may not be in its final form and may be updated or revised in the future. Accuracy and availability may vary. The authoritative record of NPR’s programming is the audio record.