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Home construction figures fell again last month, as mortgage rates began to climb. Economists from around the nation talk about the housing market conditions in their respective areas.
Today's news that U.S. home construction fell last month was another sign of the continuing national housing slump. The Commerce Department said today housing starts dropped just over 2 percent in May. Construction permits for single-family homes fell again, as they have in four of the last five months.
And yesterday, a report showed home-builder confidence at its lowest level in over 16 years. Add to that: rising mortgage rates, excess inventory, growing foreclosures, and the picture of the national housing market seems grim. But, after all, real estate is all about location, location, and location.
For a look at conditions at the regional level, we're joined now by economists from four parts of the country. Raphael Bostic, director of the Master of Real Estate Program at the University of Southern California, he joins us tonight from Cleveland, Ohio. Mark Dotzour is the chief economist at the Real Estate Center at Texas A&M University. Donald Grimes, research specialist in economics at the University of Michigan, he's in Tampa tonight. And Michael Goodman, director of economic and public policy research at the University of Massachusetts Donahue Institute, he joins us from Hartford, Connecticut.
And Michael Goodman, does the profile in the New England states resemble that of America as a whole?
MICHAEL GOODMAN, University of Massachusetts: In certain respects, yes; in certain respects, no, Ray. New England is always a bit of a different case, and I think we've got it a bit worse in some respects than the nation and a bit better in others.
We're worse in terms of the price declines that we've been seeing to date and the length at which those price declines are expected to continue. At the New England Economic Partnership, we're expecting that they'll be price declines in the New England region through the second quarter of 2008. So I think we rose much faster, and we've got a bit further to fall.
On the positive side, we don't make a great deal of housing here in New England and in Massachusetts in particular. We still have local control over land use. We don't have county government. And so it's very difficult to develop new housing, and so we haven't been doing a good job of producing housing. Consequently, there's not a big drop-off that we can expect to see in the construction sector, which is, I'm sure, an issue facing many other regions of the country.
Raphael Bostic, what's the scene as you review the data that's coming out of California?
RAPHAEL BOSTIC, University of Southern California: Well, in some regards, we're quite similar to what you're seeing in New England, in that we have a tight housing market, in terms of very little supply that's being added in the core part of the region, but also we have really strong underlying fundamentals, which have really helped keep or minimize the extent to which you're going to see these price declines.
What we see in the West is a lot of strength and a lot of confidence, but also pockets of concern, particularly among home builders, who have taken a bet that the houses they're going to build will be sold, sort of "if they build it, they will come." But we're starting to see weakness in those areas.
But in the core parts of most western cities and western locations, we're still seeing strength as the underlying fundamentals, the demand, job growth and job creation have stayed strong, and have really helped keep those markets somewhat stable.
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