Home sales down a record 33%

A sign advertises a reduced price in front of a home for sale in San Anselmo, Calif.

UPDATE: Sales of new U.S.
single-family homes fell a record 32.7
percent, according to the Commerce Department -- the lowest level since 1963.

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TEXT OF INTERVIEW

Bill Radke: We got word this morning that mortgage applications were down last week. Yesterday, we learned sales of existing homes fell last month. Later this morning, we're expecting the government to report a big drop in new home sales. Here to tell us what's going on is Marketplace's Mitchell Hartman joins us live -- good morning.

Mitchell Hartman: Good morning, Bill.

Radke: All this bad news, hadn't the housing market recovered a bit?

Hartman: Well, it had, but it was largely because of the homebuyer's tax credit -- $8,000 -- and that expired at the end of April. Now we've got kind of the morning after. New home sales were probably down 20 to 25 percent in May from the month before. And home prices are also in retreat. MacroMarkets LLC reports a majority of the housing analysts they survey every months expect prices will continue to decline this year by 1.5 percent. The Mortgage Bankers Association actually is more pessimistic. They think the fall will be twice that. And the bankers' report this morning that mortgage applications were down about 6 percent last week. That's in spite of very low mortgage rates.

Radke: Let me play devil's advocate for a second. Why should I be worried about dropping home prices? If I'm not trying to sell my home, does it even matter?

Hartman: Yes - and the reason is that jobs and the housing market are connected. With all the job loss we've had, and then this jobless recovery, people aren't feeling confident enough to buy a house or trade up. And, unemployment is a major cause of people losing their homes. So foreclosures will probably be near a record high again this year. Banks don't like owning empty houses, so they sell them at whatever they can get . . . fire-sale prices. And that undercuts everyone else who's selling, and prices keep going down.

Radke: Marketplace's Mitchell Hartman, thanks.

Hartman: You're welcome.

About the author

Mitchell Hartman is the senior reporter for Marketplace’s Entrepreneurship Desk and also covers employment.

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