Housing market continues slide
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KAI RYSSDAL:Big housing news out today. The median price of a new home dropped 9.7 percent in September from the same period last year. That’s the biggest plunge in 36 years. The government also reported that the sales of new homes rose more than expected, by almost 5 and a half percent. Sounds like good news, for home buyers at least. Could it perhaps indicate that the wind isn’t entirely out of the housing market’s sails? That maybe we’re in for a soft landing rather than a crash? Well, that depends on who you talk to, as Ashley Milne-Tyte reports.
ASHLEY MILNE-TYTE:New homes have been selling better because homebuilders have been lowering their prices.
But Christopher Thornberg of Beacon Economics says inventory of unsold homes is still at record highs, and keeps growing.
CHRISTOPHER THORNBERG:When you look at the pace of construction which has been way too rapid over the last couple of years and the pace of price appreciation, which has been way too rapid, you have a circumstance in which we have a bubble, the bubble’s popped, and it’s gonna take time to work its way out of the system. There is no soft landing here, we haven’t found the bottom.”
But some are more sanguine. Christopher Mayer of Columbia Business School says let’s not get carried away.
CHRISTOPHER MAYER:I think the idea that this is the worst decline in the housing market since 1970 is preposterous.
Mayer says the housing market was much worse in the late 1980s. Don’t forget, he says, the current declines are coming off record highs.
MAYER:The highs were so high that it was unrealistic to believe that we could continue to sell houses at the pace that we were selling them.
Mayer says a soft landing is still possible.
Real Estate analyst Mike Larsen isn’t so sure, but he says there’s an upside to a declining housing market.
MAYER:Homes in many parts of the country have gotten way, way out of whack with things like local incomes. It actually, in some respects, wouldn’t be a bad thing if we could see prices cool a little bit more, stagnate just to restore that dream for a lot of people.
Larsen says lower prices will help people avoid taking out the high risk mortgages many homeowners are stuck with today.
In New York, I’m Ashley Milne-Tyte for Marketplace.