Transcripts

"Money File"-Keeping The Home Ownership Dream Alive

SUZANNE PRATT: In tonight's "Money File," how the real estate industry can make home ownership more affordable. Here's Eric Schurenberg. editorial director of B-Net moneywatch.

ERIC SCHURENBERG, EDITORIAL DIRECTOR, BNET MONEYWATCH:This recession started with a real estate bubble and it's a real estate rebound that will end it. Last week, a couple of early signs suggested a rebound is at least imaginable again. The key is affordability. Home prices nationally are at levels last seen in 2003. The 30-year mortgage at 4.8 percent, is the lowest it's been in 38 years. Those are two good reasons that three quarters of potential new home buyers in a recent survey said that now is a good time to buy a house. So far the Federal Reserve has been the major human actor in promoting affordability, by driving interest rates down. But the real estate industry can help at the margins. For starters, lenders should unfreeze credit. Now I'm certainly not talking about a return to junk mortgages. But how about something as simple as realistic appraisals? A lot of lenders use automated valuation models, which are essentially computer guesstimates. In a falling market, AVMs can undershoot and make less money available. It would be nice, too, to rein in closing costs, which can hike the amount of cash a buyer needs to make a purchase. Title insurance in particular, remains ridiculously over- priced. And the 6 percent real estate agents' commission seems to be upheld mainly by habit than economic reality. Now last week's numbers are at best faint sparks in what is still pretty wet tinder. It will take a broad economic rebound to fan those hopes into a real rally. In the meantime, though, the real estate industry can do its part not to stomp it out. I'm Eric Schurenberg.