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Recent reports suggest that the recovery in the nation’s housing market might be starting to slow down, with both existing and new home sales down in the last months. How will this affect the overall economic health in the country? Alison Stewart speaks with Michelle Conlin, a senior correspondent at Reuters, about trends in home sales during the last year.
For a few years now, we've been hearing a great deal about the nation's housing recovery. But recent reports suggest that trend might be slowing. If it is, it could have a significant impact on the nation's overall economic health. For more about this, we're joined now by Michelle Conlin, she's a senior correspondent with Reuters. And Michelle, the reports everybody's sort of taking a look at, they say that existing home sales are at their lowest in about 18 months of July 2012 and new home sales are down by about 14 percent as compared with this time last year. So what's happening in the past 12 to 18 months.
Well, one thing that's happening, is that in order to have a health housing market you have to have a healthy first-time buyers group. I mean, first time buyers are the engine of the housing market and they have virtually been locked out of this market by various things. I mean one thing that they've been locked out by is pretty tight lending standards, I mean we're hearing about credit easing but if you're going to go to a bank to get a mortgage, it's still pretty darn tough to get one. Also, they're being locked out by high prices, inventory is really low so prices are getting bid up. And you know a lot of these first time buyers are millennials, and a lot of millennials have a lot of student debt and if you're paying off student debt. That's virtually the equivalent of a mortgage payment right there and so it's hard to take on another mortgage payment if you're gonna buy a house.
So there's a disappearing buyer, it's a simple…
Well you know economists like to call them missing households because these are households that would be traditionally would be going off and buying a home and starting off their families. Instead what they're doing is they're renting for longer and many of them are still living with mom and dad.
So you bring up the interesting question, it's the chicken and the egg question, which comes first: the stable economy — people who don't have to live at home with mom and dad because they can afford a house — or a healthy housing market?
That's right, and that would introduce a third factor. Which is you can't have a healthy housing market without a healthy job market and healthy wage growth. And even though we're seeing some job creation, these are largely service jobs, no benefits, stagnating wages. not the kind of jobs that you need to become a member of the home buying class.
But necessity is the mother of invention. There's a new kind of home being presented to folks like this. This is so interesting, it's called the express home.
That's right, the express home. So D.R. Horton is the country's largest home builder and to address this very problem of the first time buyer being locked out, they've created a new product called the express home. This is a low price point home — $120,000 to $150,000 and the entire home was designed for the first time home buyer, designed so parents could help their kids get out of the house. Designed to finally provide entry for this whole class of buyers who haven't had entry yet.
Michelle we should mention this is a bifurcated market and in parts of the country the real estate market is through the roof.
That's right. Well I always like to refer to the housing market — people always say what's going on with the housing market? The housing market, there's not one, there's a million of them. It goes zip code by zip code and if you live on one of the coasts, chances are you're in a housing market that's going nuts. You're seeing foreign buyers come in and scoop up inventory, you're seeing investors scoop up inventory.
Cash on the coast is the new financing — the new financing is cash, which is also making it hard to compete. It's hard to compete with a cash buyer if you're coming in with a mortgage.
Michelle Conlin with Reuters. Thanks for the insight.
Thanks for having me.
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