JUDY WOODRUFF: Next: the housing market.
Today's release of the Standard & Poor's Case-Shiller home price index showed sales prices rose slightly from October to November by 0.2 percent. That's on a seasonally adjusted basis. But prices were down over 5 percent compared to November 2008.
NewsHour economics correspondent Paul Solman went on a tour of Atlanta real estate with the men who developed the index. It's part of his reporting Making Sense of financial news.
PAUL SOLMAN: Real estate broker Ennis Antoine, taking two of America's top experts on housing prices, economists Karl Case and Robert Shiller, to a development minutes from downtown Atlanta.
How many bedrooms?
ENNIS ANTOINE: Three bedrooms, two baths around it...
PAUL SOLMAN: Wow.
ENNIS ANTOINE: ... granite, hardwood floors, stainless steel appliances.
PAUL SOLMAN: So, these are really nice places?
ENNIS ANTOINE: Very nice places.
PAUL SOLMAN: Sixteen very nice places in a very nasty market.
Woodlawn Estates, a would-be gated community, broke ground in 2005, the Atlanta market taking off. Just a year later, phase one was done. Local demand at that point? Unhinged.
ENNIS ANTOINE: And the wheel came off the third quarter June of '06. That's when everything started falling apart. Folks stopped paying their mortgages. They wasn't qualifying. Foreclosure inventory went up. And that's when everybody realized, whoa, wait a minute. Maybe the credit was too easy for most people.
PAUL SOLMAN: So, only two of the 16 units sold. Ennis Antoine's now betting on the $8,000 federal tax credit, extended through the spring.
ENNIS ANTOINE: And we also had a state tax credit of $1,800, which means, if you're a first-time homebuyer, you have got $9,800 just to buy a home. Couple that with lower interest rate and low prices, it was a great time to buy. We had one of our best months in October and November, great months.
PAUL SOLMAN: In fact, Atlanta home prices rose 2 percent in November, the first year-over-year increase since 2007. And a national index of home prices was up for the sixth month in a row. That's the Case-Shiller index...
... created by Karl Case and Bob Shiller.
You have looked at data back into the 19th century. So, where are we now, looking from a long-term perspective?
ROBERT SHILLER, Yale University: We have had the biggest bubble in American history, as regards to the whole market. It was everywhere, and it was huge, and it peaked in -- it went up for almost nine years up to 2006, and it's been going down now for over three years.
PAUL SOLMAN: And that suggests that it's going to go down more, it's going to come back? I mean, looking, again, long-term, what's your best guess?
KARL CASE, Wellesley College: Well, there's reasons to believe it's going to stay down, and there are reasons to believe it's going to come back, but...
PAUL SOLMAN: You know that's why -- that's why you economists drive people crazy? You understand that?
KARL CASE: Absolutely. But here's the thing. Prices are down 30 percent. We believe that, when prices go down, people -- people buy more. So, the attractiveness of this property when prices have been falling for three years is pretty high.
PAUL SOLMAN: So attractive that Bob Shiller, a longtime NewsHour guest, who warned early and incessantly about both the stock market and real estate bubbles, now worries that another bubble could be forming.
ROBERT SHILLER: People have gotten very speculative and very quick to respond to changes, and they think that the recession is over, and you want to buy before the market turns up very much. And, so, you want to buy in advance and ahead. And that sparks new speculative excitement.
PAUL SOLMAN: But Chip Case, normally more optimistic than Shiller, fears another crash more than another bubble.
KARL CASE: We did 6.5 million home sales this year. That's a huge number. But it's -- it's not for sure that this is a bottom. I mean, if you look at the four states where half the foreclosure auctions have come from, there's just a huge inventory still there. It's going to take a while for that to clear.
PAUL SOLMAN: Those are?
KARL CASE: Florida, California, Arizona, and Nevada.
PAUL SOLMAN: Meanwhile, all across America, developments like Woodlawn Estates sit vacant. And, so, 14 units here recently went to auction.
ENNIS ANTOINE: The starting bid is $50,000 on...
PAUL SOLMAN: Fifty-thousand?
ENNIS ANTOINE: Fifty-thousand.
PAUL SOLMAN: What are they going to go for, do you expect?
ENNIS ANTOINE: Probably $100,00, $105,000.
PAUL SOLMAN: Almost two-thirds off the quarter-million dollar asking price, a steal.
In the car coming over here, when Ennis told us that these things were starting off at $50,000, you both independently said, "Gee, maybe I will buy one of these," right? You are the speculative fever.
ROBERT SHILLER: That's -- it's a sense of opportunity that is exciting some people right now.
PAUL SOLMAN: And, in Atlanta, says Ennis Antoine, the inventory of unsold homes is down to 65,000.
ENNIS ANTOINE: We like to see right at 50,000 55,000. But, in '07 and '08, we have seen it as high as 100,000. So, it's definitely improving as inventory is being reduced.
PAUL SOLMAN: But you're not way down to where you have been historically?
ENNIS ANTOINE: No, sir, not at all. But were getting toward that point. And, so, we should be there by the second quarter of '10.
PAUL SOLMAN: Supporting the optimism, says Professor Case, only half-a-million new homes are being built on an annual at the moment.
KARL CASE: Five hundred and forty thousand, 550,000, that's the lowest level in 50 years, and it's been that low now for a full year. We're absolutely producing nothing relative to what we have produced over the last 50 years.
PAUL SOLMAN: So, that means that fewer homes are available, the prices are down, interest rates are low.
KARL CASE: Sales are up.
PAUL SOLMAN: Sales are up. So, that means things will get better.
KARL CASE: That's what it would seem.
PAUL SOLMAN: And, yet, those darned two-handed economists kept looking at their data.
ROBERT SHILLER: We saw prices jump up since April, according to the Case-Shiller index, but, lately, it's been weakening again. And, with our latest numbers, it was just flat. And I worry that there's -- you know, it was driven too much by these tax credits and government support and the sense of the end of the recession, and that it might just slip back into further declines.
KARL CASE: There are 15 million unemployed people in the United States.
PAUL SOLMAN: At least.
KARL CASE: That's a big number. And the duration is longer than it's been ever. And you add on top of that the incredible difficulty of getting these properties through the foreclosure process. There's three million properties in foreclosure, like these units, and -- and it's not over. We're not out of the woods.
PAUL SOLMAN: Or, thinking globally, but speaking locally, at least not out of the Woodlawn Estates.