MICHELE NORRIS, host:
From NPR News, this is All Things Considered. I'm Michele Norris. It may seem to you as if we're flogging a dead horse, but there are new numbers out today that tell us the housing market is in dismal shape. The Commerce Department said new housing starts plunged to their lowest level since 1959, back when they started tracking this figure. Separately, the Federal Housing Finance Agency said home prices fell nearly nine percent last year. So, is there any bottom to all this? NPR's Yuki Noguchi has been asking economists that question.
YUKI NOGUCHI: Sometimes, even a gloomy economic report contains some bright spots. Not so with this latest housing news, says Patrick Newport.
Mr. PATRICK NEWPORT (Economist, IHS Global Insight): Not only were the numbers really bad, but the leading indicator in the report tells us that the numbers over the next two months will be ugly.
NOGUCHI: Newport is an economist with IHS Global Insight, a forecasting firm. He says the number of housing permits, which is a leading indicator of future building, remains very low. Five years ago, cheap loans fueled demand for new homes. Now all that's slammed into reverse, and there's already a huge glut of homes on the market.
Mr. NEWPORT: People are losing their jobs. They're losing their homes. And they're moving in with relatives. And so you have an extra home that's added into the market. There are just too many homes for sale.
NOGUCHI: Newport and others estimate there are roughly one million excess homes on the market. And actually, that oversupply stands to get worse.
Mr. RICK SHARGA (Senior Vice President, RealtyTrac): There's a shadow inventory that a lot of people aren't talking about.
NOGUCHI: That's Rick Sharga, senior vice president of RealtyTrac, a research firm. He says the market right now is underestimating the supply. That's because there's a block of homes that are in foreclosure and had been taken over by banks but are not yet put up for sale on the Multiple Listing Service.
Mr. SHARGA: You have hundreds of thousands of bank-owned properties that aren't yet showing up on those inventory reports.
NOGUCHI: So, when finally can we say we hit bottom? Sharga says that happens when prices stabilize, inventory and foreclosures decrease, and home sales increase.
Mr. SHARGA: In a normal market cycle, you'd already see people coming back into the market to buy these properties.
NOGUCHI: But, he says, both banks and consumers lack confidence. So, even bargains aren't tempting. If there is any bright spot, Sharga says, it's this.
Mr. SHARGA: One glimmer of hope I can give you is that right now we believe the peak year in terms of new foreclosure activity will probably be this year. And that, at least by itself, should start the healing process a little bit.
NOGUCHI: The good news, in other words, is that things are so bad, it simply can't get too much worse. Yuki Noguchi, NPR News.