Housing is in a slump

Summary

Marketplace Morning Report: "Housing is in a Slump" – Detailed Summary

Release Date: May 23, 2025
Host: David Brancaccio
Duration: Approximately 10 minutes

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1. Overview of the Current Housing Market

The episode opens with Sabri Benishore highlighting a significant downturn in the housing market. Sales of existing homes have plummeted to approximately 4 million annual sales in April, a stark decline from the 7 million annual sales recorded between 2020 and 2022. These figures are sourced from the National Association of Realtors.

Sabri Benishore (01:06):
"Housing is in a slump. Sales of existing homes fell in April to about 4 million sales a year. For comparison, almost 7 million existing homes were sold a year from 2020 to 2022."

Benishore further notes the likelihood that new home sales are also experiencing a downturn, attributing this trend to a combination of high home prices, elevated mortgage rates, and overall economic uncertainty.

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2. Contributing Factors to the Housing Slump

Lori Goodman from the Urban Institute provides insights into the factors exacerbating the housing market's decline.

Lori Goodman (01:41):
"Mortgage rates are now hovering near 7%, and the median existing home price just hit $414,000, according to the National Association of Realtors."

Goodman emphasizes that house prices have been outpacing wage growth over the past five years, severely challenging affordability for potential homeowners. This sentiment is echoed by the Marketplace Reporter.

Marketplace Reporter (02:03):
"Years, affordability is just severely challenged."

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3. Impact on Affordability and Homeowners

The combination of high mortgage rates and escalating home prices has placed the dream of homeownership further out of reach for many, especially those transitioning from renting.

Teresa Fuller (02:00):
"Outpacing wage growth over the last five."

Lori Goodman (02:00):
"For households that have been renting and are looking to own, house prices are far outpacing wage growth over the last five years."

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4. Builders' Hesitancy and Increasing Inventory

High borrowing and material costs have made builders cautious about initiating new projects. Consequently, the inventory of existing homes for sale is gradually improving, having increased by 20% year over year, as reported by Zillow economist Orfe Divangui.

Lori Goodman (02:06):
"Meanwhile, builders are hesitant to break ground. With borrowing and material costs so high, the inventory of existing homes for sale is gradually improving, up 20% year over year, says Zillow economist Orfe Divangui."

This uptick in inventory is expected to exert downward pressure on home prices.

Sabri Benishore (02:21):
"If you have more supply coming on."

Marketplace Reporter (02:23):
"The market and inventory accumulating, you should."

Sabri Benishore (02:26):
"Get downward pressure on prices."

Goodman adds that Zillow forecasts a nearly 1% decline in home prices over the next year, with more significant drops anticipated in major markets such as New York, Louisiana, Chicago, Dallas, and Washington, D.C.

Lori Goodman (02:28):
"Zillow forecasts home prices will fall nearly 1% over the next year, even more in top markets like New York, Louisiana, Chicago, Dallas, and Washington, D.C."

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5. The Intersection of Natural Disasters and Housing Market Dynamics

Transitioning from the broader housing market trends, the report delves into the specific challenges faced by communities recovering from natural disasters, particularly wildfires in California.

Sabri Benishore (03:57):
"A major natural disaster and people are desperate to put their lives back together, they may feel a suddenly very real pressure to sell their land or what's left of their homes as quick as possible and at very low prices. Investors trying to take advantage of that situation may offer very low prices."

This scenario often leads to what Benishore describes as the "collateral damage" of such transactions—communities disappearing as properties are acquired by external, often predatory, investors.

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6. Predatory Investors and Proposed Legislative Solutions

David Brancaccio amplifies the issue by recounting instances where "vulture capitalists" have taken advantage of disaster-stricken areas to purchase properties at undervalued prices.

David Brancaccio (04:27):
"Soon after the firestorms in Southern California this year, some folks got calls, texts and visits not from venture capitalists, but from what many considered vulture capitalists, predatory investors."

California State Representative John Harabedian, representing Altadena—a town severely affected by wildfires—addresses this pressing issue.

David Brancaccio (05:19):
"It is incumbent on us to figure out how do we get them a humane exit at fair market value so they get every dollar and every cent that they're owed for their house at a time when fair market value is very questionable."

Harabedian introduces the Community Stabilization Act, aiming to mitigate the impact of predatory investors by ensuring homeowners receive fair compensation.

David Brancaccio (05:34):
"Back to the two words Harabedian used earlier, predatory and outside. Below market offers is the predatory part. The word outside refers to outside financial interests coming in to buy property, buyers who might not take into account local values and local needs, possibly altering the unique character of these places."

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7. The Community Stabilization Act: An Innovative Financial Model

The proposed Community Stabilization Act leverages a 1977 federal law under the Community Reinvestment Act, which encourages banks to lend to support disadvantaged communities.

David Brancaccio (06:07):
"So if not state taxpayers, then where's the money coming from? The answer is a 1977 federal law that leans on banks to lend to help disadvantaged communities. The idea is for California to create an investment using what's called Community Reinvestment act money from banks which would flow to investors who then use the money to buy burned property for normal and not fire sale prices."

A key aspect of this plan is ensuring that only eligible investors—specifically non-profit organizations with deep community roots—are involved. This approach aims to prevent outside investors from exploiting disaster situations for profit.

David Brancaccio (06:44):
"These will be entities and organizations and individuals that live and work in the community and they won't be outside investors that are just looking to make an extra dollar off of a disaster."

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8. Goals and Expected Outcomes

Miguel Santana, President and CEO of the California Community Foundation, supports the initiative, highlighting that non-profit investors can address the housing affordability crisis by developing burned land thoughtfully.

Miguel Santana:
"These non profit investors could choose to develop the burned land in a way that addresses the housing affordability crisis."

Goodman elaborates on the potential benefits, such as making properties available to first-time homeowners or individuals who have been displaced within the community.

Lori Goodman (07:12):
"For example, making the property available for first time homeowners who are looking to buy or for people who've been displaced in the community."

Post-development or sales, the proceeds are structured to repay the bank and fund the program, with non-profits retaining a portion to sustain their efforts.

David Brancaccio (07:23):
"After a nonprofit builds on the property or finds a buyer it likes, it would sell and use the proceeds to pay back the bank for its capital and the state for running the program. The nonprofit would also keep some of the money for its trouble."

Goodman notes the alignment of the non-profits' missions with ethical property sales.

Lori Goodman (07:36):
"There is an ability to align mission to the selling of the property itself."

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9. Market Conditions and Future Prospects

The initiative banks on the resilience of the Southern California real estate market, anticipating that land values will rebound once recovery efforts—such as debris removal and environmental restoration—are completed.

David Brancaccio (07:42):
"It's all a bet that land values will return once all the debris, toxic soot and general disruption gets cleared, which is a decent bet given the persistently tight real estate market in Southern California."

Real estate professionals have observed that even four months post-fire, the law of supply and demand has already positively influenced sale prices for burned land, particularly for medium-sized to smaller flat parcels.

David Brancaccio (08:07):
"More than four months after the fire, real estate people tell me the law of supply and demand has already boosted sale prices for burned land, at least for the medium sized to smaller flat parcels."

Teresa Fuller, a real estate agent specializing in burned lots in Altadena, expresses optimism for the affected residents.

Teresa Fuller (08:12):
"I really want to see people in Altadena who have experienced so much loss, who want and need to move on. I want to see everyone get the most."

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10. Legislative Progress and Closing Remarks

The Community Stabilization Act is currently navigating through various committees within the California Legislature in New York (likely a transcript error, possibly referring to Hollywood or another local legislature).

Sabri Benishore (08:32):
"Marketplace's David Brancaccio reporting there on what's called the Community Stabilization act that is still winding its way through committees in the California Legislature in New York. I'm Sabri Benishore with the Marketplace Morning Report from APM American Public Media."

The episode concludes with remarks from the host, reaffirming the critical nature of the proposed legislation in safeguarding communities from exploitative practices in the aftermath of natural disasters.

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Notable Quotes with Timestamps

• Sabri Benishore (01:06):
  "Housing is in a slump. Sales of existing homes fell in April to about 4 million sales a year. For comparison, almost 7 million existing homes were sold a year from 2020 to 2022."

• Lori Goodman (01:41):
  "Mortgage rates are now hovering near 7%, and the median existing home price just hit $414,000, according to the National Association of Realtors."

• Marketplace Reporter (02:03):
  "Years, affordability is just severely challenged."

• Sabri Benishore (03:57):
  "A major natural disaster and people are desperate to put their lives back together, they may feel a suddenly very real pressure to sell their land or what's left of their homes as quick as possible and at very low prices."

• David Brancaccio (04:27):
  "Soon after the firestorms in Southern California this year, some folks got calls, texts and visits not from venture capitalists, but from what many considered vulture capitalists, predatory investors."

• David Brancaccio (05:34):
  "Back to the two words Harabedian used earlier, predatory and outside. Below market offers is the predatory part."

• Lori Goodman (07:12):
  "For example, making the property available for first time homeowners who are looking to buy or for people who've been displaced in the community."

• Teresa Fuller (08:12):
  "I really want to see people in Altadena who have experienced so much loss, who want and need to move on. I want to see everyone get the most."

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Conclusion

The "Housing is in a Slump" episode of the Marketplace Morning Report provides a comprehensive analysis of the current challenges facing the U.S. housing market, emphasizing the dual pressures of high costs and economic uncertainty. It delves deeper into the ramifications of natural disasters on housing stability, spotlighting legislative efforts aimed at protecting vulnerable communities from exploitative real estate practices. By highlighting both macroeconomic trends and localized solutions, the episode offers listeners a nuanced understanding of the multifaceted housing crisis.

Transcript

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[Sabri Benishore]

Housing is in a slump. From Marketplace, I'm Sabru Benishore, in for David Brancaccio. Sales of existing homes fell in April to about 4 million sales a year. For comparison, almost 7 million existing homes were sold a year from 2020 to 2022. Those numbers are from the national association of Realtors. Later this morning, we're going to hear how brand new homes are selling. Odds are those numbers were down, too in April, and it's no surprise, really. Home prices are high, mortgage rates are high, and there's lots of economic uncertainty. Marketplaces Mitchell Hartman reports.

[Lori Goodman]

Mortgage rates are now hovering near 7%, and the median existing home price just hit 414,000, according to the national association of Realtors. Lori Goodman at the Urban Institute says, for households that have been renting and are looking to own house prices, far.

[Teresa Fuller]

Outpacing wage growth over the last five.

[Marketplace Reporter]

Years, affordability is just severely challenged.

[Lori Goodman]

Meanwhile, builders are hesitant to break ground. With borrowing and material costs so high, the inventory of existing homes for sale is gradually improving, up 20% year over year, says Zillow economist Orfe Divangui.

[Sabri Benishore]

If you have more supply coming on.

[Marketplace Reporter]

The market and inventory accumulating, you should.

[Sabri Benishore]

Get downward pressure on prices.

[Lori Goodman]

Zillow forecasts home prices will fall nearly 1% over the next year, even more in top markets like New York, Louisiana, Chicago, Dallas and Washington, D.C. i'm Mitchell Hartman for Marketplace.

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[Sabri Benishore]

A major natural disaster and people are desperate to put their lives back together, they may feel a suddenly very real pressure to sell their land or what's left of their homes as quick as possible and at very low prices. Investors trying to take advantage of that situation may offer very low prices. The collateral damage of this transaction is that communities disappear. In California, there's a proposed law that would help people who lost homes in the wildfires avoid this Marketplace's David Brancaccio reports.

[David Brancaccio]

Soon after the firestorms in Southern California this year, some folks got calls, texts and visits not from venture capitalists, but from what many considered vulture capitalists, predatory investors.

[Marketplace Reporter]

More outside financial interests start offering folks cents on the dollar for their houses at a time when a lot of people are desperate.

[David Brancaccio]

California State Representative John Harabedian, a Democrat, represents Altadena, a center of one of the fires, a town where more than 9,000 homes and businesses were lost. My across the street neighbor in Altadena, a retiree named Sandra, says she got creepy low ball offers which she ignored. The California governor initially banned unsolicited offers like this, but that moratorium ran out in April. Now Assemblyman Harabedian has introduced a state bill to deal with this.

[Marketplace Reporter]

It is incumbent on us to figure out how do we get them a humane exit at fair market value so they get every dollar and every cent that they're owed for their house at a time when fair market value is very questionable.

[David Brancaccio]

Back to the two words Harabedian used earlier, predatory and outside. Below market offers is the predatory part. The word outside refers to outside financial interests coming in to buy property, buyers who might not take into account local values and local needs, possibly altering the unique character of these places. The hope is a proposed investment vehicle could address both.

[Marketplace Reporter]

This is an innovative financial model to Finance these transactions at a zero cost to the state. This would not cost the state any money.

[David Brancaccio]

So if not state taxpayers, then where's the money coming from? The answer is a 1977 federal law that leans on banks to lend to help disadvantaged communities. The idea is for California to create an investment using what's called Community Reinvestment act money from banks which would flow to investors who then use the money to buy burned property for normal and not fire sale prices. Who gets to use that money under this plan? Not just anybody. The eligible investors would be non profit organizations and here's the key part, organizations with roots in the community.

[Marketplace Reporter]

These will be entities and organizations and individuals that live and work in the community and they won't be outside investors that are just looking to make an extra dollar off of a disaster.

[David Brancaccio]

It's an idea with support from a big philanthropy, the California Community Foundation. Miguel Santana, the foundation's president and CEO, says these non profit investors could choose to develop the burned land in a way that addresses the housing affordability crisis.

[Lori Goodman]

For example, making the property available for first time homeowners who are looking to buy or for people who've been displaced in the community.

[David Brancaccio]

After a nonprofit builds on the property or finds a buyer it likes, it would sell and use the proceeds to pay back the bank for its capital and the state for running the program. The nonprofit would also keep some of the money for its trouble.

[Lori Goodman]

There is an ability to align mission to the selling of the property itself.

[David Brancaccio]

This is all a bet that land values will return once all the debris, toxic soot and general disruption gets cleared, which is a decent bet given the persistently tight real estate market in Southern California. In fact, more than four months after the fire, real estate people tell me the law of supply and demand has already boosted sale prices for burned land, at least for the medium sized to smaller flat parcels.

[Teresa Fuller]

There just aren't very many to be had, certainly in LA County.

[David Brancaccio]

Teresa Fuller is a real estate agent who specializes in selling the burned lots of Altadena.

[Teresa Fuller]

I really want to see people in Altadena who have experienced so much loss, who want and need to move on. I want to see everyone get the most.

[Sabri Benishore]

Marketplace's David Brancaccio reporting there on what's called the Community Stabilization act that is still winding its way through committees in the California Legislature in New York. I'm Sabri Benishore with the Marketplace Morning Report from APM American Public Media.

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