One on One with Susan Wachter, Real Estate Professor at the Wharton School of Business
Friday, May 09, 2008
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SUSIE GHARIB: Joining us now for more analysis of the national housing picture, Susan Wachter, real estate professor at the Wharton School of Business. Hi, Susan.
SUSAN WACHTER, PROF. REAL ESTATE & FINANCIAL MGMT.: Hello Susie.
GHARIB: It's good to have you on our program as well. As you've seen this week, we featured five regions of the nation's housing market. We went to Washington, DC, Manhattan in New York, Detroit, Silicon Valley and as you just saw, in Miami. Each of them face different issues. If you were to step back though, and describe the state of the national housing market, what would you say at this point in time?
WACHTER: Well, this is a national crisis. It is playing out differently in local different markets and there is still a ways to go nationally for prices to fall. We are not at the bottom.
GHARIB: What would it take for you to know that when we're going to make the turn? What is it going to take to do the turn around?
WACHTER: Well, first of all, we are going to see many more sales. We still see a slowdown in activity and for fundamentals we need a repricing, prices will need to drop maybe another five, 10 percent.
GHARIB: All right. And in terms of the prices, at what point will that turn become? I mean, how low do they have to go?
WACHTER: Well, prices, and of course it is absolutely market by market, every market differs, but what is true nationally is that buyers are standing by the side. They are not buying. They are waiting for prices to fall and sellers are not yet cutting their prices to where in fact, we will have this inventory over hang stop being a downward pressure.
GHARIB: There has been a lot of debate on that, whether this is a time for buyers to go in or are there concerns that prices are going to lower for sellers. Should they hold off because this isn't a good time to sell? Where are you in that debate? What is your view on what is the right time for buyers and for sellers?
WACHTER: Well, buyers, they are right, they are facing real uncertainty. Of course it is market by market. The real uncertainty is, are we in a recession? How deep is it going to go? That's going to affect housing prices.
GHARIB: Now, in Congress there are a number of bills that are being talked about and debated about improving this housing situation and to help it to recover. Do you think any of them will you know, be passed in the end and will they make a difference in turning around the housing sector?
WACHTER: Depending on how severe the slowdown and maybe recession is, we may very much need to embrace these and I think they have to be at the ready. The problem with our over all economy is really in the housing market and the solution has to be targeted to the housing market.
GHARIB: Do you think any of these bills that are currently being discussed in Congress will be passed and will they make a difference?
WACHTER: Well, can't do the political prognostication, but I think they have a chance from what I am hearing because Republicans and Democrats see the danger and see what is happening on Main Street. So there does seem to be buy in and the fundamentals of the market need support. There needs to be a bottom otherwise we could be in free fall and this bill, the Frank bill addresses that issue.
GHARIB: Now, in terms of the recovery, when that does happen, what will the nature of that recovery look like in the housing market based on your experience of looking at other downturns and recoveries?
WACHTER: Well, it is not going to be a bounce to the upside. This is going to be a sharp decline still to come, how sharp depends on the overall economy, and then the rise unfortunately will be slow. We could be two years out, three years out before we are back to the previous highs.
GHARIB: All right. Well, thank you very much for coming on our program. We appreciate it Susan.
WACHTER: Thank you.
GHARIB: My guest tonight, Susan Wachter, real estate professor at the Wharton School of Business.
