CASE-SHILLER HOME PRICES JUMPED

CNBC Online

July 30, 2013

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Case-Shiller home prices jumped

Tue 30 Jul 13 | 07:33 PM ET

The following transcript has not been checked for accuracy.

first up, let's look at some pretty good housing numbers out today. case-sheller, biggest yearly gain since march 06. on the other hand, u.s. homeownership slipped to its lowest level in almost 18 years. that puts it back to '94 and '95. question, is that a bad number? is it really worth it to always buy a home? here now from million-dollar listing, top real estate broker ryan surhan. nest seeker. steve warren also joins me onset. when you say go back 19 years, what's happened here is we went from a peak in 2004 of almost 70%. 70% of americans owned homes. we're down to 65%. so that ain't bad. 65% turns out to be about the average for the last 35 years. what's wrong with that? i don't think anything's wrong with that. i think it's actually pretty good when you compare it on the global market. when you look at germany, has a very robust economy comparatively, it has 53% homeownership. but i think the american dream is homeownership. the american dream is not owning a home that you can't afford. right. and it's very, very simple. but nobody understands it. so the reason we were at 70% in 2004 was because people were getting 90% loan value, no doc loans and told the american dream is owning a home even if they couldn't afford it. which is just crazy. which got us into a lot of trouble. i just made a little list. down payments, virtually nothing. i'm for 20% down payment. the old fashioned way. no income verification. they ignored the credit scores. now days, by the way, did you know banks who make a mortgage, they have to keep part of that mortgage in their portfolio. they can't put it all on fannie and freddie. now, should the government loosen up? i'm hearing liberals in washington want the government to loosen up on all these criteria so we can go right back in. there is no question, by far the most important factor in determining whether a loan is going to default, a mortgage is going to default, is the skin in the game. the down payment. so you're exactly right. if we want that, even 10% down payment, you would see a dramatic reduction in the amount of foreclosures. now, here is what worries me, larry. you asked is the government going to loosen it? i see them already doing that. over 90% of the new mortgages have been made over the last 18 months. over 90% carry with them fha insurance, fannie mae, or freddie mac. the taxpayer is still on the hook here. i want to say one other thing. i love homeownership. it's a great thing. you don't do anybody a service by putting them into a home they can't afford and can't pay. do you rent? or is all of your stuff home sales? both. do rentals and sales throughout manhattan. so let me ask a dumb question. why is it back to rent? it's not. in terms of numbers, makes sense. of course, of course. you have a lot of people over the last five years who have become very risk averse for a good reason. they can rent and save for a larger down payment to be able to get a better loan at a lower interest rate, to have lower monthly payments, which makes life much easier. you have a lot of people that are just scared of putting all of their capital into one asset that they could lose. except now is not a bad time, in my opinion, to buy. you've got still lower interest rates than any time virtually we've had in 30 years, even though they've gone up. and prices are still pretty low. we've seen a big decline in housing prices. so i agree with you. there are times you want to rent, but now is not such a bad time to be hiring. i agree. but we had a guy on, i asked him, he did a little work for us, over the long run, i'm talking many decades, which has better rate of injuries, the stock market or real estate? the answer is stock market. of course. i think that's to your point, you put all your eggs in your home, which you can barely afford to finance. you're in a heap of trouble. that's why i say if homeownership stayed 65%, maybe drops a little more, but that's where it's been on the barometer for the last three decades. that's okay. it's not like the end of the world. yeah. it blows my mind when you read these stories of people who make $60,000 a year but they own five condos in miami. because we let them. because we have legislation that says hey, hey, hey, no, it's okay, you should be able to own five condos. even though you can't afford it. it doesn't make any sense. that is the american dream. it blows my mind. but as business, what are you selling now? everything, because of you. by the way, thank you for my commission. i really appreciate that. it's okay. comes on the show, does a great job, and then he tweets, you sale million-dollar house? no, we sold something for $3,650,000. i'm still looking every single day for my commission and haven't received that. i want to thank you. you're welcome. something a little better, i was going to create job growth, give you a spot on my team maybe in your down time. okay. but you are selling homes now. absolutely. and you're selling expensive homes. it's doing really well, isn't it? we're also having an increase in the first-time buyer market. an increase in second home buyers once again. we're selling across the board. there is no slowdown, especially on the coast. now i think we're having some sub markets within the middle of the country that are starting to ck up. as you said, because interest rates are starting to slowly tick up because prices are slowly starting to tick up or 12% with case-shelling this year. what does everybody do when prices go up? everyone buys. one cost of all of these government subies to housing, fannie, freddie, fha, is that in this country generally, we are overinvesting in housing and underinvesting in capital. by the way, i'm opposed to the mortgage reduction. i'm opposed to it. if you have a low flat tax rate, it doesn't matter, it's not worth anything. then why do we say it's better to build a home than a factory? obama is talking about these manufacturing institutes but he wants to have homes, wants to have everything. wants to spend money on everything. can't do that. that's not the way it works. can't spend money on everything. i tell myself that every day. got something cooking? i promise you -- have you sold larry one of those million-dollar homes yet? thank you to steve and ryan.

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Ryan Serhant Ryan Serhant
Licensed Associate Real Estate Broker