Housing Market: Buy, Hold, Sell
WASTLER: Do you hear that? That ever so faint hissing noise? It's the hot air seeping out of the so-called real estate bubble. It's getting louder here in New York but in other areas of the country like south Florida, Los Vegas, Southern California it's getting pretty hard to ignore. The trend may continue. More than 30 of the 100 largest real estate markets in the U.S. are expected to see price declines in the next year. Let's find out what that means for homeowners and prospective buyers and sellers in the U.S. Mark Zandi is chief economist with Moody's Economy.com and are go-to guy on real estate. Welcome back Mark.</s>MARK ZANDI, MOODY'S ECONOMY.COM: Good to be with you.</s>WASTLER: So lay it out here. It's pretty obvious the real estate bubble is deflating. Has it deflated all the way? What are we getting into here?</s>ZANDI: Well it's not deflated all the way, no. The housing corrections in full swing. It's about a year and a half old and I think it has about another year to run. So '07 will be another tough year for the housing market.</s>WESTHOVEN: Mark one of the things that we talk about with the housing market is that even though it's been cooling off, as long as the job market is OK and it has been, that the economy is going to be OK. But what are your forecasts for the job market for next year? Is that something we need to worry about?</s>ZANDI: Well, it's something to worry about. I think the job market's going to hang together reasonably well. Everywhere except in housing and in manufacturing. I mean, most businesses are in great financial shape, profitability is high, and balance sheets are pristine. I don't see any reason why they would pull back significantly. But those in the housing industry, those in the vehicle industry, manufacturing will see some job losses in those industries.</s>VELSHI: Mark, it's Ali. National housing prices I've always maintained mean nothing to most people unless you're moving from a market that is performing one way to a market that is performing another way. For most people if you're staying within your region if you have a house that you want to move into another house, it's still largely a wash for you.</s>ZANDI: Yes, that's right. For most people this shouldn't be much of a problem, particularly if your horizon is more than three years. Most people it is, they don't plan to move. If they've moved into a new home they'll probably be there for five, six, seven, eight years. For most people is shouldn't mean a whole lot. It's a problem for those people who bought in the last three years and those people who need to sell and buy some time in the next couple, three years.</s>WASTLER: Mark, a lot of this bubble is fed by cheap money. You've got all of these exotic mortgages, and easy money, sort of type things, to get you in the housing market. But it looks like that run is beginning to erode a bit. We're seeing a spike in foreclosures. What will be the economic impact of that? Not just people with those loans but for everybody.</s>ZANDI: That is a problem. Mortgage foreclosures and delinquencies are rising rapidly and all signs are that they will continue to rise very sharply in 2007. It's difficult thing for those people involved, for the borrowers and lenders. I think it won't become a broader economic problem because the dollar amounts are still too small. But that's assuming that the job market hangs together reasonably well and interest rates don't rise. If, for whatever reason the job market heads south or interest rates spike higher, then the mortgage problems will be more severe and the economic consequences more significant.</s>VELSHI: Jennifer, ask him if you should buy your house.</s>WESTHOVEN: That's exactly where I'm going. Mark, we talk about these home prices, what should one do right now who's either think being buying? Should they wait? And someone who might be wanting to sell right now but they're not budging when it comes to that price. What should people who are really right now in the middle real estate market wanting to make a deal, what should they be waiting for?</s>VELSHI: Mark; feel free to substitute someone for Jennifer.</s>ZANDI: She's in the market, is she? Well I would be patient if you're a buyer. You'll have a good open window for at least another six, 12 months. Get to know the neighborhoods, know the homes that are up for sale, that potentially will come up for sale in the next few months and negotiate and negotiate from a point of strength. I think you'll get a very good price. If you're a seller, you know, I think you probably should sell sooner rather than later. You should be aggressive and work with the potential buyer and try to figure out what it is that he or she needs and try to get it to them quickly. I'd get out of this market as fast as possible.</s>WASTLER: Mark, just a real quick question right now. With the housing market the way it is right now if you're an investor looking to get in at the bottom is now the time to start going into homebuilders, things like that?</s>ZANDI: Well you know you have to have a long enough horizon. I think if your horizon is the next three, six months, the answer is no. If your horizon is next couple, three years, and then I think yes, you start looking. But I do think you'll get an even better opportunity sometime over the next three, six months to get in and get a higher return over the next several years.</s>VELSHI: Mark Zandi good to talk to you, thank you so much for being with us.</s>ZANDI: Thanks for having me.</s>VELSHI: Mark Zandi is a chief economist at Moody's Economy.com. 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