RENEE MONTAGNE, HOST:
Outside of Florida there are signs that the U.S. housing market is slowing down again. After rising sharply in 2013, home prices in many areas have leveled off and fewer homes are being sold. Interesting and also worrisome developments for most Americans because their home is often their most valuable asset. Joining us now is Chris Arnold, who follows housing for NPR News. Good morning.
CHRIS ARNOLD, BYLINE: Good morning, Renee.
MONTAGNE: So sales down, prices flat. What should we make of that?
ARNOLD: Right. So last year home prices rose a lot, like we just heard about in Greg Allen's piece. In Florida it might have been 20 percent, nationally they were up 13 percent around the country by one measure. That can't keep happening. You know, we saw that in the housing bubble, prices just kept going up and up and up, and then eventually the bubble pops and it's like a train wreck.
So the fact that prices are leveling off is probably more of a good thing than a bad thing. The thing that might be a sign of trouble is that the pace of home sales has been slowing down. So in five of the past six months Americans bought fewer homes than the month before and home sales are now at their lowest level in 18 months.
MONTAGNE: Which does not actually sound very good.
ARNOLD: No, it doesn't, but we should also stress that it's too early to know exactly what's going on with home sales. It's been a crazy cold winter with all kinds of storms. I'm sure everybody's aware of that. If things keep slowing down, as the weather gets better, we get into the spring, that might be cause for concern, but we really just have to wait and see.
And right now, each month Americans get more jobs, the economy's getting better, so we very well may start to see more homes getting bought.
MONTAGNE: In the spring, when the weather's better, many people usually do start looking around for a house. How hard will it be for them to get a mortgage?
ARNOLD: This is interesting. So a lot of economists think that it's still harder than normal and the credit is too tight, that it's too hard to get a mortgage. Banks right now are making the same number of loans for home purchases that they were back in 1995. Meanwhile, we've got 20 percent more households today, so that's a clear disconnect. You'd expect to see more purchase mortgages, more mortgages that are used to buy houses.
Now, people are buying more houses now than they were in 1995, but a bigger part of the market are these investors going in and buying up properties like we just heard about in the previous story. Now, as home prices level off, there aren't as many deals, those investors are going to stop buying houses, so if banks don't loosen up and normalize their lending standards, some analysts say, look, it's tough to see how home sales are going to keep rising.
MONTAGNE: And Chris, where are we now with the rate of home ownership in the U.S.?
ARNOLD: Well, I've got a chart in front of me here. Can we do this on the radio? Can I talk about the chart?
MONTAGNE: If you're very clever, yes.
ARNOLD: Okay. Well, I don't know if I'm very clever, but - so here we go. So this chart, it looks like a mountain, of course, and the home ownership rate started at 64 percent in the early 1990s and it went up and up and up and up and up and then the bubble burst and then, wham, it comes slamming down the other side of the mountain, and now it's at 65 percent. So we've fallen almost all the way back down to where we were before things started to go up in the '90s.
Now, the question is what happens next. Some analysts say, hey, we can level off here. Others say no, home ownership's going to keep declining. But this is really important 'cause for generations owning a home has been a big part of middle class American life. You build equity in your home and over the course of your life that builds up a big nest egg.
MONTAGNE: Okay. So there's a new government report that finds household wealth has increased to a record level and I'm guessing that a lot of that has to do with home values.
ARNOLD: It absolutely does. Two things have gone up. Home prices have gone up and the stock market was on a total tear last year. So those two things together have pushed that up. And for Americans of retirement age, this is an interesting statistic, 85 percent of them own a home. So this is all great for them and it's a big part of why economists say, look, what happens with the home ownership rate is a really big deal, it gives people a stake in something of real value.
MONTAGNE: Chris, thank you very much.
ARNOLD: Thanks, Renee.
MONTAGNE: That's NPR's Chris Arnold. Transcript provided by NPR, Copyright NPR.