Gregory J. Heym
Executive Vice President, Chief Economist
Nightly Business Report Transcript
SUSIE GHARIB: We all know the U.S. housing market is stuck in the basement, but just how bad is it? Suzanne Pratt reports.
SUZANNE PRATT, NIGHTLY BUSINESS REPORT CORRESPONDENT: From adorable bungalows in sunny south Florida to Mediterranean McMansions in New Jersey, the U.S. housing market is still a mess. Sure, there are pockets of strength, but on average home prices are down 30 percent since the 2006 peak. That's on par with the drop homeowners experienced during the great depression. The worry is that prices will fall even more. Economists say that's as the market bears the heavy burden of steady foreclosures.
BRIAN LEVITT, ECONOMIST, OPPENHEIMER FUNDS: The biggest problem in the U.S. housing market is this oversupply that exists in aggregate across the country and just not enough household formation, not enough job growth, allowing that younger generation to come in and buy a lot a lot of these homes in inventory.
PRATT: Beyond current inventory, some guess there's another four to six million home loans that could end up delinquent or in foreclosure. And then there's the quarter of mortgage borrowers underwater on their loans because of the home-price plunge. Economist Greg Heym says on top of all that, peoples' attitude toward home ownership has shifted.
GREG HEYM, CHIEF ECONOMIST, HALSTEAD PROPERTY: They've stopped looking at it as an ATM or something that's going to rise sharply every year. It's not something to bet on. It's a home. You should buy a place that you want to live in and not be so obsessed with its value at any given moment in time.
PRATT: Of course, there are a few positives suggesting the market will one day build a new foundation. First, developers have pulled way back. So much so that new home sales are on pace for the worst year since the government began keeping records 50 years ago. And, don't forget mortgage rates. The 30-year fixed is hovering around 4 percent, the lowest level in 60 years. On top of that, there are some amazing deals out there and housing affordability is extremely attractive.
LEVITT: The good news is that we've seen home prices come down pretty significantly and you're at a point now where home prices interestingly enough are actually cheaper than rents.
PRATT: But others say the nation's housing market cannot turn around until confidence picks up in a big way and that cannot happen with the unemployment rate hovering close to 9 percent. Suzanne Pratt, NIGHTLY BUSINESS REPORT, New York.
Monday, October 24, 2011