Foreclosure headline in a newspaper
Foreclosure headline in a newspaper - 
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JEREMY HOBSON: Now let's get to home prices. They're still falling in most of the nation's major cities, according to the closely-watched Case Shiller Housing index. All but one city -- sunny San Diego -- reported monthly declines in home values. And eight cities hit their lowest point since the housing bust.

For more on this, let's bring in Juli Niemann, analyst at Smith Moore and Company. She's with us live, as always, from St. Louis. Good morning Juli.

JULI NIEMANN: Good morning Jeremy.

HOBSON: So how much worse can things get in the housing market?

NIEMANN: Well, this decline really was not unexpected except by the chronically hopeful. Right now we're looking at Shiller -- still expecting probably a 10 percent decline, gradual decline, ever a period of time until we get this housing inventory out. And that's the big problem is we have a huge amount of housing inventory. The banks are doing this pretend and extend -- pretend the house has full value, extend the time before they repossess. But there's no bottom until you've resolved the debt situation.

HOBSON: And can we have a recovery, Juli, if we don't reach a bottom and see a recovery in the housing market?

NIEMANN: You can have recovery in sectors. For example, in the energy sector housing prices went up in Bismark, Fargo, North Dakota, Texas, almost across the board, education centers, Champaign Urbana and Chicago.

HOBSON: My home town. Champaign Urbana.

NIEMANN: There you go, it's rising. Government -- Boston and D.C. Financial services -- Connecticut. Those sectors are rising and the housing market is rising there. But for the rest of the United States, we still have this huge problem of unemployment and industries not coming back. And that's where we're going to have big debt problems. Consumers have to pay down the debt, limit new spending, banks have to write everything off their ghost assets. And the biggest problem you're faced with there is default or defer. The company basic is looking at the economy -- pick up enough to bring back demand and prices. Right now it's just prayer. And I've found over the years prayer's not a really good effective portfolio management tool. But the banks have to write all of this off before we can have a real turnaround in all the pricing.

HOBSON: OK Juli Niemann, analyst at Smith Moore and Company. Thanks for your time.

NIEMANN: You bet.

Follow Jeremy Hobson at @jeremyhobson