Jeremy Hobson: Today is the deadline for eight of the country's largest mortgage servicers -- including Bank of America, Citigroup, and JPMorgan Chase -- to submit new plans to the government on how they'll handle foreclosures going forward. This is related to the settlement being negotiated between the lenders and all 50 states over how foreclosures were handled, or mishandled after the housing market collapse.
And while the housing market may not be collapsing any more it seems in no hurry to bounce back either. And it could be a while before it does according to the latest piece by Roben Farzad, a senior writer at Bloomberg Business Week. He's with us now from New York. Good morning.
Roben Farzad: Good morning, Jeremy.
Hobson: Well you say that the housing market is worst than we think? How bad is it?
Farzad: If you had housing starts from their current half-century low rally at unprecedented -- let's say 60 or 70 percent -- they would merely hit the average low of the past six housing recessions since 1950. Did you get that? We dug ourselves that deep a hole, so there's very, very little comfort here.
Hobson: Well why hasn't housing recovered along with so many other sectors of the economy?
Farzad: I think because of the bubble on the way up. I mean, the easy answer is that the construction and the fraud was just so enormous. By one estimate, five million people who should have been renters were prematurely made homeowners. And now they're kind of in the wrenching process of having the market evict them out of it. And meanwhile, all of these barely used homes, you have stories and the excerpts of Phoenix and Tuscon of bobcats and coyotes taking over half-empty homes.
Hobson: But you're saying that this is really an issue of inventory -- they're just too many houses on the market.
Farzad: It's so out of whack right now in terms of the foreclosures of the existing homes that could be cleared out, there's just an enormous backlog. The oversupply of homes, according to one analyst, is now at 1.6 million homes, and that's not an incidental number.
Hobson: OK Roben, tell me this: how long until we finally see a recovery in housing?
Farzad: If you subscribe to the idea that housing is a busted-up asset bubble and it was the biggest asset bubble we ever had, all you need to do is look at need analogs in history -- the United States railroad-building bubble in the 19th century, the tech bubble at the beginning of the last decade. In a lot of cases, these prices have not come back to bubble-level, certainly if you look at NASDAQ and companies like Cisco and Dell. I mean, they're nowhere close to where they were back then. So this could well be a generational thing, and that's very hard for a lot of people to hear.
Hobson: Roben Farzad, senior writer with Bloomberg BusinessWeek. Thanks so much.
Farzad: Thank you, Jeremy.