STEVE INSKEEP, HOST:
OK. So we've got that image of people pulling up to the drive-through window to pick up a house. Let's hear more about the housing market and how it's changing from David Wessel, economics editor of The Wall Street Journal, regular guest here.
DAVID WESSEL: Good morning.
INSKEEP: And let's remember, we're talking about what was a huge driver of the Great Recession.
WESSEL: Absolutely. There was, as you know, early in the 2000s, a flood of mortgage lending, a good chunk of it to subprime borrowers. Wall Street turned those loans into securities, sliced and diced them, sold them in pieces around the world. And everything was great, because housing prices more than doubled between 2000 and 2007. Then the bubble burst. Housing prices fell by more than 30 percent. That brought down the financial house of cards and we ended up with a very, very deep recession.
Now, usually when you have a recession, the Fed cuts interest rates, mortgage rates fall, people buy houses and people build houses and everything gets back to normal. But this time, that didn't happen. Until recently there's been an oversupply of houses for sale and an undersupply of mortgages to lend.
INSKEEP: Okay. So it sounds like - OK. You're saying till recently there was this oversupply of houses. Not anymore. It sounds like things are at least beginning to get back on track, from Yuki Noguchi's reporting there.
WESSEL: Absolutely. I mean, it's one of the few really good things in the U.S. economy right now. Housing is coming back. House prices are nowhere near where they were before the crisis, but on average, they rose about 6 percent last year, according to the people at the Case-Shiller Index, which is kind of the gold standard of housing prices.
In places hardest hit by the bust, prices are up a lot. Phoenix, prices are up 23 percent in the last year. But there's still a ways to go. Prices were up last year in Atlanta and Detroit, but housing prices in those cities are still lower than they were in the year 2000.
INSKEEP: Okay. So some people are still underwater, as we heard in Yuki's report and yet - I mean, every time the average price in a market goes five or $10,000 it must be a certain number of people who get above water again.
WESSEL: That's right. Geez, you're starting to sound like an economist.
INSKEEP: I just listen to you, David, and learn.
WESSEL: If you compare the numbers with the end of 2011 to the end of 2012, there are 1.7 million fewer homeowners who were under water. That means their loans were now smaller than the value of their house. But as Yuki pointed out, there's still more than one in five homeowners with a house worth less than the value of the loan.
In Nevada, more than half the people have mortgages that are bigger than the value of their house. In Florida, it's about 40 percent. So it's still a big problem.
INSKEEP: What about the construction of new homes?
WESSEL: Well, that's really important 'cause that's where the jobs are. Construction jobs are up 135,000 in the last four months. The government said yesterday that construction started on more new housing units in February than in any month since June 2008 and permits for new houses in the future was up a lot in February. That's seen as a really good sign.
Housing starts are still about half the pace they were before the recession, except for apartment buildings because so many people want to rent apartments or have to rent apartments because they can't buy homes, the construction of multifamily houses has been strong for some time now.
INSKEEP: Very briefly, David Wessel, you said an oversupply of houses, an undersupply of mortgages. That was the situation during the great recession. Is there a better supply of mortgages now?
WESSEL: Better, but not good. Rates are really low if you can get mortgage; 3.6 percent for a 30-year loan. And the Fed has been pushing on that. But mortgages still aren't easy to get for many people. Banks are still very cautious. In fact, because of that, about 30 percent of all the homes sold recently were sold for cash. And in some markets where homes are cheap and foreigners are buying up houses, it's even more.
In South Florida, my colleagues tell me, 60 percent of the houses that are sold, are sold for cash. The people don't get a mortgage.
INSKEEP: Wow. OK, David, thanks very much.
WESSEL: You're welcome.
INSKEEP: That's David Wessel, economics editor of the Wall Street Journal with some perspective on the fast-changing housing market.
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