Excerpts
JEFFREY BROWN (Newshour): The troubled U.S. housing market got a bit of good news today with word that some prices are rising, but full recovery remained a long way off.
Four cities, Chicago, Minneapolis, Washington and Boston, posted the largest increases in the latest Case-Shiller home price index. But prices in Detroit, Cleveland, Las Vegas and Phoenix were selling at the same levels as January of 2000, more than 10 years ago.
What's more, the survey of 20 cities found overall home prices have actually fallen over the last 12 months. And home sales for this year are on track to be the worst in 14 years. And things could get worse yet, once banks pick up the pace on millions of foreclosures, as expected. They have been delayed by a government investigation into mortgage lending practices.
PROTESTERS: Prosecute the criminals! Attorney generals, prosecute the criminals!
JEFFREY BROWN: Amid anger over the banks' handling of foreclosures, 36 state attorneys general and the Obama administration have been trying to negotiate a settlement with the five largest mortgage servicers. It could include a lump sum settlement of more than $20 billion that states could then use to modify mortgages.
Meanwhile, the futures of mortgage giants Fannie Mae and Freddie Mac are still to be determined, with a new plan from the Obama administration reportedly in the works. Fannie Mae and Freddie Mac still back most home loans in the U.S.
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NICOLAS RETSINAS, Harvard Business School: It's amazing. Interest rates are at a 50-year low, and yet we have such a tepid housing market. And, yes, prices have gone up in a number of cities over the last couple months, but they're down from a year ago and really down from where they were almost at beginning of the decade. So it's still a very difficult, sort of shaky time in the housing market.
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GUY CECALA, "Inside Mortgage Finance": Most people would say the real number to look at is the year-over-year change. And as long as we keep declining, that's bad news. I think, cumulative, we have already seen a 30 percent or so decline, according to the Case-Shiller index. So, this is just more bad news.
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JEFFREY BROWN: Now, Nic Retsinas, fill in the picture a little bit behind the big numbers. Talk about -- you mentioned some of the differences in regional and in different cities. What do you see there when you look out?
NICOLAS RETSINAS: Well, it's a big country.
And some markets are in better shape than other markets. Clearly, in the markets such as the Southwest, south Florida, parts of California, there was such substantial overbuilding that we have a huge excess inventory. In other parts of the country, like the Upper Midwest, that have faced severe economic problems, you have struggles on the demand side.
So while there are some silver linings, parts of Texas, parts of the Northeast, where you think we're probably at or near a bottom, as long as this foreclosure cloud is hovering overhead, a recovery is going to be in the distance.
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NICOLAS RETSINAS: Well, it's better to think in terms of regional, because people buy homes in particular neighborhoods, not in the United States of America.
However, we do have a national housing finance system. And that national housing finance system is tightening credit, requiring higher down payments. So it is discouraging people who might want to buy. And for those who have the means to buy, they're discouraged because what they see is a possible downfall in prices.
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JEFFREY BROWN: Now, we have all mentioned the foreclosure issue.
Let me start with you, Guy Cecala, on this. It seems as though it's somewhat in limbo at this point, given what the attorneys general are doing, what states are doing, legal proceedings. What's going on?
GUY CECALA: Yes, backing up a little, one of the things that is pushing housing prices lower is the fact that we have so many distressed property or foreclosed properties that make up housing sales. They tend to have lower prices.
And if you compare those to what we saw several years ago, it's naturally going to result in price declines. The issue going on now is that foreclosures have slowed down. And you might think, gee, isn't that good news? But it's not slowing down because unemployment has improved and a lot of people are catching up on their mortgages. It's slowing down because there's this big settlement that the federal government and mostly the state attorney generals are trying to work out with the largest mortgage servicers in this country.
And it's bogged down the whole foreclosure process, to the point where legitimate foreclosures are being kept out of the market. And that's going to create a backlog going forward.
JEFFREY BROWN: And the point is that we need this process to take place. As painful as it's going to be, we need the foreclosures to go forward.
GUY CECALA: Yes. We have somewhere in the neighborhood of four million distressed properties out there. Those are either seriously delinquent mortgages or ones already in the foreclosure process.
And most of those loans have to be pushed through the system at some point. And the longer we take to get through that, the longer the housing market is going to take to recover.
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JEFFREY BROWN: And, so, Nic, staying with you, what difference would it make once a settlement comes through? What difference would it make to consumers and to these banks?
NICOLAS RETSINAS: Well, in the short term, it would probably even more properties on the market. And in the very near term, it might further depress prices.
But once we're through with this, we can start dealing with the excess inventory. And when we clear the excess inventory, we can have a supply-demand balance. And that's when you can see a recovery begin.
JEFFREY BROWN: Now, Guy, the administration also has talked about its sort of hoped-for plan for new foreclosure settlements. What's going on with that?
GUY CECALA: Well, they're also trying to work this through. And I think there's a of pressure on the administration now to do something to revive the morbid housing market.
One of the few things they see as necessary is resolving the foreclosure crisis. As we said, everybody is sort of in agreement now that there's a huge pipeline that has to start moving through the process. And if you keep that backlog, you're not talking about a recovery for two or three more years.
So the sooner you can do it, the better. And that's why I think the administration is trying to goose along this settlement as much as they can. They just haven't had a lot of luck.
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