Transcripts

The Rise In Home Sales May Not Really Exist

SUSIE GHARIB: Not that inspiring. That's how one analyst described the latest numbers on the housing market. New figures show existing home sales rose 2.4 percent for May. Now at first glance, that's a solid hike. But look closer and it's a different story. Many of those sales were foreclosures and short sales, signs that the housing market has not bottomed out. Suzanne Pratt reports.

SUZANNE PRATT, NIGHTLY BUSINESS REPORT CORRESPONDENT: Manhattan real estate broker Brian Lewis is on the front line of the worst housing market in generations. After a very quiet fall and winter, his business is finally perking up. But he says contracts only get signed if the price is right.

BRIAN LEWIS, EXEC. VP, HALSTEAD: The deals being made today are the deals where our sellers are based in reality. They know that buyers out there are out for one thing and that's value.

PRATT: And there may be plenty more value out there. According to the National Association of Realtors or NAR, the average sales price for existing homes across the country dropped 17 percent in May from the year before. And yes, that improved affordability is stirring some sales. But most real estate experts like economist Anna Piretti say while the market is stabilizing, it has not yet bottomed.

ANNA PIRETTI, SR. ECONOMIST, BNP PARIBAS: People are losing their jobs. They are not being able to pay for that mortgage and foreclosures continue to rise. So, we're not quite ready to see a full recovery in the housing market. That's probably not going to be seen until late 2010, possibly 2011.

PRATT: And there are other problems likely to keep the market down. First, is the glut of inventory. While the number of unsold properties is now below a 10-month supply, that's nearly double the normal level. Second, the NAR says poor appraisals are stalling or even killing deals. Because of new regulations, local people are often not doing the appraising. As a result, the appraised value tends to come in lower than the agreed on purchase price. On top of that, after falling to historic lows earlier in the year, mortgage rates are ticking up.

PIRETTI: If that were to continue and accelerate, that would clearly hurt any recovery in the housing market because conditions are improving but they remain incredibly fragile and that would be very bad for the market psychology if mortgage rates were to pick up substantially.

PRATT: Experts say a fragile but stabilizing housing market means buyers could get an even better deal in six months. Sellers, who don't need to move may want to wait until next year before putting their home on the market. Suzanne Pratt, NIGHTLY BUSINESS REPORT, New York.