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Why single-family home prices rose

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Bill Radke: Single-family home prices came up unexpectedly in the latest report from Standard & Poor’s and Case-Shiller. Here to talk about that is our regular Tuesday morning guest — analyst Juli Niemann at Smith, Moore & Company. She joins us live from St. Louis. Hil, Juli.

Juli Niemann: Good morning, Bill.

Radke: You have been our pessimist about the housing market Juli, how does it hit you that home prices lifted a little?

Niemann: Well, very exciting because you’ve got low interest rates, low prices. These are the lowest in 40 years. Prices are up by nearly 1 percent, so that’s semi-exciting. But the problem is that the first-time home-buyer’s credit closing through June is now gone. The punch bowl has been taken away from the real estate party because there’s still a huge supply overhanging the market.

Radke: Well then let’s talk about that home-buyer tax credit. Some people are saying, “Look, here’s the proof that that was a boondoggle. The government spent a bunch of money on it. It was a mirage and prices are going to come back down.” Other people say, “What it proves is tax credits — that’s the only thing making people buy now at all. And the fragile economy needs that. Bring on more government stimulus.” Where do you stand, Juli?

Niemann: Well they key thing is it did move a lot purchasing early, moving it ahead of time. Now you’re basically faced with a huge problem of overhang. California, for example, completely over as far as the real estate recession is. New York is still sinking. Miami — condo-mania — that’s going to collapse anyway. But it’s a huge overhang of shadow inventory held by banks — foreclosed, not on the market. You don’t want to depress prices even further. We still have more foreclosures going on, so a new home tax credit simply will not take care of that problem. You have to ride it off, and we’ve got to get rid of this overhang.

Radke: OK. So a little more stimulus OK with you despite the deficits that are scaring a lot of people around the world?

Niemann: Well the stimulus has to come in the form of jobs. Because people aren’t going to buy houses until they know they have jobs and that they can maintain a mortgage. And bottom line, the U.S. economy and the world economy depends on government stimulus and support. But not this artificial kind, it has to be in the jobs area. The patient is so weak and still on crutches, and the governments are going to take away the crutches in the name of fiscal austerity now.

Radke: We’ll talk more in coming weeks about how to create jobs. Analyst Juli Niemann at Smith, Moore & Company, thank you.

Niemann: You bet.

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