MELISSA BLOCK, host:
The housing sector can tell us a lot about the health of the economy, but it's been sending off a lot of mixed signals. Some analysts think the worst is over, that housing hit bottom last spring and is now on the mend. Others are convinced that housing is the economy's Achilles' heel.
Joining us to help sort out where the housing market is headed is economist Karl Case of Wellesley College, one of the creators of the S&P/Case-Shiller Home Price Index.
Professor Case, welcome to the program.
Professor KARL CASE (Economics, Wellesley College): Happy to be here.
BLOCK: And one new number that we're seeing is this: For pending home sales, they had been climbing throughout 2009. But then in November, that number - the number of homes placed under contract - took a big tumble, the first drop in nearly a year. And it was a whole lot steeper than was expected. What does that tell us?
Prof. CASE: Well, it's hard to say it. A lot of these numbers have a plus and a minus in them, and pending home sales did, it dropped in November. But it's up 16 percent over a year ago. And there's a number of statistics that are good, a number that are bad and a lot that are confusing.
BLOCK: When you look at these confusing numbers, what do you conclude? Can you conclude anything?
Prof. CASE: Well, I believe we've actually hit a bottom, and I'm not saying this with much conviction. I think that the positives in the marketplace now, the statistics that show an increase in sales, a response to the government programs, there are buyers, I think that outweighs, in my mind to some extent, these big negatives. But you can't say anything with certainty these days.
If, by the way, if house prices fall another 15 percent, it really would imply that we're likely to have a double dip in the economy. Because if prices fall, then the mortgages that we wrote in 2008 and 2009, the mortgage lending that took place is going to be bad. People are going to be underwater on those mortgages and that's another shot to the system that we don't need.
BLOCK: Another wave of foreclosures.
Prof. CASE: Another wave of foreclosures could be coming if that's - if prices fall.
BLOCK: There has been, Professor Case, an $8,000 incentive for first-time homebuyers, a tax credit that was supposed to run out in November, but it's been extended to April of 2010. What happens when that expires?
Prof. CASE: Well, all the momentum that you see in the data are caused by not only just the $8,000 credit, but by the fact that interest rates are being kept low by the Feds, and they're buying up mortgage bank securities, which is preventing the mortgage rate specifically from going up. If the Fed withdraws that, it's going to slow things down, but we don't know how much.
BLOCK: You mentioned that you think that we've hit bottom in the housing market, but unemployment is still climbing, and I would think that would give you some pause.
Prof. CASE: It gives me great pause. I mean, if people don't have jobs, they can't make their payments and that continues to feed the foreclosure chain. Fifteen million people are unemployed and the duration of unemployment is longer than it's been. That's a big negative. It's a big headwind that this tailwind from the government has to overcome.
BLOCK: What other numbers are you going to be looking at in the months to come, Professor Case, that will, you think, maybe answer some of these questions about where the housing market is headed?
Prof. CASE: Well, the two that I think are the most important are the existing home sales numbers that come out every month and the number of starts. If that starts to pick up, then there's more optimism in the land. And, of course, prices - the last Tuesday in every month, the Case-Shiller prices come out. And I think right now they're tending to show a mixed picture.
They've been up over the last three, or four or five months. But the number which came out last month, which was for October, was pretty shaky. It was not down, but it wasn't up. And so, all these numbers have something to offer. And in digesting them, it's just the hardest moment in recent history, as far as I'm concerned.
BLOCK: Professor Case, thanks very much for talking with us.
Prof. CASE: A pleasure.
BLOCK: That's Professor Karl Case, who teaches economics at Wellesley College. He's also one of the creators of the S&P/Case-Shiller Home Price Index.