There
are new numbers out Tuesday on home prices. They rose 3.6 percent in
the second quarter of this year compared to the first, though they are
still 5.9 percent lower than a year ago. But what's so puzzling is that
despite lower prices, homes are not selling. CBS News correspondent Chip
Reid examines the cause.
In South Bend, Indiana,
real estate agent Peggy North can hardly believe it. A two-bedroom
bungalows hasn't sold at $51,000, about $10,000 less than it sold for
eight years ago
"In 21 years, I've never seen this market," she said.
Overall home prices in South Bend are down 10 percent from a year ago, and sales are down 17 percent.
Nationally, it's the same story: Home prices are down to 2003 levels, but sales are on track to be the lowest in 14 years.
It raises the question: With mortgage rates at 50-year lows, and home prices so low, why aren't people buying?
One reason is that after the housing bubble burst, banks put in place stringent new standards for getting a loan.
In
2007, the average credit score for a homebuyer obtaining a Federal
Housing Administration loan was 630. Today it's 700, higher than the
national average of 692.
Lawrence Yun of the National
Association of Realtors offered this: "I believe there are about 750,000
to up to 1 million people who could potentially enter the market. Yet
because of the overly-stringent underwriting standards, they are being
denied a mortgage"
But economist Karen Dynan said fear
also plays a big role with unemployment at 9.1 percent and the
possibility of a second recession looming.
"They don't
want to take on mortgage commitments," she said, "and then end up not
being able to meet those commitments and not being able to sustain home
ownership."
But for those willing to take the risk, this
can be a good time to buy. Marlando Ruhle bought his dream house in
Silver Spring, Maryland for $284,000 after the price dropped from
$346,000.
"So this is your dream house?" asked Reid.
"Definitely right now," said Ruhle.
He admits, though, that loan approval isn't as simple as it was 10 years ago, the last time he bought a house.
"The process itself took us probably about a month and a half to close on this house," he said.
"And last time?" asked Reid.
"Last time, it took probably about a week," said Ruhle.
Washington,
D.C. is one of the strongest real estate markets in the nation. But
even in D.C., the average home with a "For Sale" sign out front has been
on the market for 126 days.