Slow Start To Spring Housing Market

Apr 16, 2014

Usually as the weather heats up, so does the U.S. housing market. However, according to recent housing data, the market’s spring selling season is getting off to a slow start.

Despite expectations this past winter that warmer weather would rekindle growth, the market is seeing higher prices and mortgage rates, and a lack of houses for sale in some markets.

NPR Correspondent Chris Arnold discusses this slowdown with Here & Now’s Robin Young.


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From NPR and WBUR Boston, I'm Robin Young. It's HERE AND NOW.

And after a brief glimpse of spring, parts of the country have snow on the ground again. This morning, baseball players in Chicago last night played in 30-degree temperatures, winter still with us, claws out. This hasn't been good for the U.S. housing market, and there are other problems, as well.

So let's bring in NPR's economics correspondent Chris Arnold, covering housing and the economy for us. He's in the studio. And, Chris, I understand we got new numbers today on home construction that were disappointing.

CHRIS ARNOLD, BYLINE: Right. The number of the new homes that builders started construction on rose a bit, actually, over the past couple of months, but the couple of months before that, it crashed really hard. So, the long-term view here is that we're about 6 percent below where we were a year ago. And by other metrics, too, the housing market's been slumping. So this is starting to make some economists nervous.

They say, look, the recovery is already been frustratingly slow. This is the general economic recovery. Wages are flat. Job growth's been anemic. A healthy housing market could do a lot to help create jobs and boost the economy, but we're just not seeing that right now.

YOUNG: And when you say, you know, we're - you talk about a slump, can you quantify that for people?

ARNOLD: Yeah. So the pace of home sales has fallen in six of the past seven months. And that puts us back to where we were two years ago in terms of the pace of sales. That also means we're down about 15 percent off the peak. So that's kind of - gives you a sense of where we are. And as we said, construction is down also, so that means fewer jobs are being created. So things are definitely moving in the wrong direction, not the right direction.

YOUNG: Well, and we mentioned weather, you know, you can't do construction in weather, but why else might things not be moving in the right direction?

ARNOLD: A lot of this has to do with just basic supply and demand and prices and things like that. So a couple years ago, you probably remember we had really, really, really super-low interest rates, and people like me were refinancing again and again to take advantage. That drew a lot of people into the market, because we also had very low prices, and this was post-crash.

Now, what's happened over the past couple of years is people buying up those homes that were out there. That's pushed up prices. There were also investors who came in and pushed up prices. And as that has been happening, stuff was going on with the Federal Reserve, and the economy's been recovering. So, interest rates are now rising, too, and that creates a double whammy.

So, prices are higher, interest rates are higher. All of a sudden, people who were looking at houses are thinking, wait a minute. I'm not sure I can afford the house that I thought I wanted to buy. So that's part of the problem.

YOUNG: Well, and you also say that credit has gotten tighter.

ARNOLD: Right. And this is definitely an issue that some of the - and this goes back to those investors who came in. A lot of them were using cash, whereas they've now kind of - they're pulling back from the market because those crazy deals aren't there anymore. And now, so what we need is - or what the housing market needs is what it's always needed, is just regular, middle-income Americans to come along and get a loan and buy a house.

And so now that credit's gotten tighter, a lot of economists say that's keeping people who should be able to own a house making them unable to own a house.

YOUNG: OK. Well, so tight credit and all these other things that you mentioned, but go back to weather. Does this mean if weather is playing a big role, does it conversely mean that as the weather gets better, we might see more of a rebound?

ARNOLD: That's what the realtors are hoping for. And they always hope for that. If you have friends who are realtors, they always say, well, this summer, we really hope things are going to get better. So we'll see. What we do know is that at some point, we just have to start building more houses. The U.S. population is growing. People have been living in their parents' basements. Supply is tight. So whether it's this summer or next summer, at some point, we're going to have a lot more guys with nail guns framing houses and putting roof shingles on again, and that just has to pick up.

YOUNG: Music to your ears. NPR's Chris Arnold, thanks so much.

ARNOLD: Thanks, Robin.

YOUNG: You're listening to HERE AND NOW. Transcript provided by NPR, Copyright NPR.