house arrest. the sexual assault case against dominique strauss-kahn is in danger of collapsing. prosecutors in new york now say they are not sure they can believe the hotel maid who said he sexually assaulted her. with the huge crowds supporting -- shouting at support, libyan leader moammar gadhafi says he will in his words move the battle to europe, says he'll target homes and offices against nato air strikes. i'll be back at the top of the hour with more live news. right knew time for "your bottom line." the first good news in months for homeowners. a rare sign of life in the spring selling season. good morning, everyone. i'm christine romans. but the fact remains, the value of your biggest asset is down some 30% over the past few years. the housing market has changed and so have you. what you need to know if you own a home, want to buy one or rent. plus, is it ever okay to walk away from that mortgage even if

you can afford to pay? let's start with the american dream of owning a home. if you're a buyer it's a dream market, only if you can get the loan. with ten of the nation's largest mortgage lenders denying almost 27% of loan applications last year, that's up from 23.5% in 2009. this is according to "wall street journal" analysis. if you're a seller it's a nightmare. home prices rose slightly for the first time in eight months, this according to the most recent s&p case-shiller 20 city index. that's the sign of life this spring i was it telling you about, but don't get too excited. prices are down 32% from their peak, set in 2006. the chart tells the picture there. home ownership also is at the lowest level now since 1998. chris mayor from columbia university school of business, chris, is the worst behind us here? >> depends where you live. i think in some of the coastal markets in coastal california,

the northeast, i think we really are starting to see things turn around and, you know, places like atlanta, but if you're in florida, nevada, parts of california, and, you know, arizona, i just -- it's hard to say that the worst is behind us. >> all real estate is local, you're absolutely right. taking the average home price in america is like taking the average temperature in america. i mean it's different depending on where you live. i get that. when we look at the way home ownership has declined to 1998 levels, not necessarily bad news, really. because maybe home ownership was bumped up too high for false reasons? >> yeah. i think we now understand what i think we didn't understand for a long time, which is not everybody should be a homeowner and, you know, eventually between 80 and 90% of americans will own a home, but i think many of us in our 20s, either we move around a lot, maybe we, you know, took on a little too much debt, student loans, other things, you know, aren't in a position to own a home and i think we shouldn't put some of

those people into homes that they're owning. we should find ways for them to rent. >> looking at a chart right now that shows recent recessions and then shows how home ownership is fared and really for 10, 20, 30 years, no matter what, home ownership levels would continue to move higher until that peak in the 2000s amid very easy credit. do you think more people are going to continue to shy away from buying a house because either they can't get the loan, as we saw in other statistics, or because they've changed their view of the american dream? >> well, i think that, you know, one of the interesting facts is if you look at people who went through the great depression and owned stocks, people who owned stocks in the great depression and lost all their savings, invested less in stocks for the rest of their lives. >> right. >> so there is a little bit of, you know, risk i think that, you know, some of the people that have been really burned in housing, are going to sort of think they don't want to own a home for a long time. there's a big but there, which is, at the same time, you know, owning a home is really a sign

of financial stability. if you're able to do it. and so i don't think it's going to be as bad as, you know, the great depression evidence of people who just never invest in the stock market again. but, you know, hopefully people are going to be a little more responsible about that decision. >> we can only hope. jim carr from the national community reinvestment coalition, communities need the housing market to recover. state and local governments, they're expected to shed more than 100,000 jobs in the third quarter. without the property tax revenues they can't fund operations. communities are facing an uphill battle here if people can't buy homes, jim. >> right. well you're absolutely right. and the problem is not is if the somehow things are leveling out. we're on route to another 2 million foreclosures this year and probably have at least another 2 million in the pipeline on top of that. and so despite the good news that you talked about earlier at the top of the show, the reality of it is that the more likelihood is that home prices are going to continue to slide through the end of this year.

one good note is nice, but it doesn't make a song. and so i think there's real trouble in the housing market in the years to come. >> mark kelly, the ceo of remax, you know real estate from the front lines, do you think there's real trouble for the housing market to come or do you think that we're reaching a bottom here? >> i think we're reaching a bottom. right now we call it kind of a salt tooth recovery. you'll see it up and down, bump along the bottom for the next year or two. unlike the case-shiller report, remax does a report, case-shiller, a three-month average, the data we're looking at from them is april. remax looks at current data and what we've seen is the last three months we've seen an increase in the prices and three of the last four months an increase in transactions, month to month. that's great signs. >> jim, chris and margaret, stick with us. we have so much to talk about about housing. because the big question in an unhealthy market, do you rent or buy? what to do and what makes sense

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♪ we can't read your mind ♪ ♪ read your mind ♪ we need your questions ♪ each and every kind ♪ every kind ♪ will this react with my other medicine? ♪ ♪ hey, what are all these tests even for? ♪ ♪ questions are the answer ♪ yeah ♪ oh can a home be a man or woman's castle even if she or he doesn't own it? yes. even if the latest rave of renters of those who can't afford to buy are opting out and renting instead. people like alexander clark. >> like a full service building and outdoor pool. amenities aside, 23-year-old zander clark is at an age when some people consider buying their own homes.

>> i've thought about investing and purchasing a home. my father purchased a home when he was my age. so when i knew i was going to move to baltimore, i looked at properties, but i just knew that in my line of work, that i would need to be row locatable. >> reporter: as the housing market sinks he's seen friends who own homes struggling. >> it's been on the market for a year and they're not getting the price that they're asking for. that's scary to think you have to keep lowering the price. >> reporter: the numbers tell the story. home ownership has dropped steeply from its peak rate above 69% in 2004, to the current just above 66%. home ownership is now at the level it was in 1998. but even those who have the money and can withstand the tougher credit checks are opting not to buy but to rent instead. chris mayor researchs housing for columbia university bisselus school. >> i think a lot of people are saying even if i can make the down payment, i have the income and the credit, is this the best

time to jump into the market. >> reporter: doug is president of the national multihousing council. >> we're seeing some opting not to buy even though they can afford it because some are betting on housing prices falling farther. some predictions they will fall more. others who are betting on the ability to change. >> reporter: and with the jobless rate at 9.1%, being able to pick up and go where the jobs are is critical. >> i prefer to rent. i like the flexibility that comes along with renting. >> reporter: the face of a new generation of renters, and, perhaps, the future of home dwelling in general. >> i think there's a lot of evidence that people need to have down payments and so we should have viable options for people who are not in a position in their lives to be owners. there's nothing wrong with that. and hopefully we'll, you know, start to eliminate some of the stigma so when people buy, they'll buy for good reasons. >> zander clark works in human resources for a big retailer. if he gets a promotion he wants to take it and move cross

country and not be tied down limiting his mobility at work. that's something that a lot of young people are thinking about. so which is your american dream? all those amenities and that flexibility or the responsibilities that come with home ownership especially when prices are bottoming at best. chris mayor and jim car are back with market kelly. you say renting is a viable option for those who can't afford home ownership. renter growth has outpaced household growth. new household growth creation four years in a row. or at least more larger percentage of renters? >> i don't -- i don't, you know, home ownership is a great thing in terms of if you're in a stable place to do it. but there's no evidence to suggest that well-run rental communities, well-run rental properties are bad for locations in general, and i think we are going to see -- i was just down in atlanta the gypping of this week and, you know, a lot of the sales are going to people who

investors who are looking to rent properties, single family homes out. >> as we know the numbers are showing that a third of home sales are almost a third, are investors and sometimes those are professional investors, not like you and me, i guess me, getting in and buying a new home. margaret, i want to ask you, you run a real estate company and we've heard so long from people who make their money selling real estate, that it's not going to get any worse. the bottom is almost around the corner. what does it feel like or what do you think about this new talk that renting is a better option for some people, they need to build their cash cushion and the housing market suspect good for them right now? >> there's quite a few things. one is the confidence that you have in your income, employment and so on, but renting versus buying is a personal decision based upon your personal situation. it's still the american dream and many people want it. you're right, there are about 20 to 30% of investors out there who are buying homes and a lot of them actually are someone buying one home in their neighborhood and they're going to keep it and rent it.

if you look at the number of families that have been foreclosed upon, they can't buy homes now. they need the rental properties. that's why you see a big increase in the whole rental market. >> jim, we just showed a map that showed most of the country the home ownership rate is declining, parts of the midwest, new york state, other places you see it going up. do you believe, jim, opening a home, the classic american dream, is still the better way to go and we do need to ditch the idea that houses never go down in value. we have to throw that out of the window. is home ownership good for communities? >> absolutely. there have been a number of studies that show there are significant differences in the behavior of owners versus renters. first of all, just starting with improving their own properties as well as making sure that the neighborhoods remain, you know, really viable, that they have the right amenities, things of that nature. even going beyond that, there's nothing wrong with being a renter. i think it would be unfortunate if, in fact, we move forward with public policies that really didn't promote home ownership because it's important to remember that for more than 50

years, the american home was not only the centerpiece of where one lived but owning a home was the number one source of wealth accumulation for the typical american household. if that's lost what fills that gap? the truth is, opinion polls show, that most americans still aspire to own a home, including the majority of americans who already own say they would buy again. the challenge is for us to fix this housing market that has been in disrepair for several years now and really get it back on track so that those who really want to own because of the inherent benefits of owning a home, wealth creation, neighborhood stability and others, can enjoy that and those who choose to rent can rent. >> chris mayor, thanks for joining us. margaret, jim, stick around. more than a million homeowners are doing it, walking away from the home they own and walking away from the debt that comes with it. is its right thing to do? we'll check it out next.

the mortgage bankers association says nearly 13% of all homeowners with mortgages are either behind on their payments or they're already in foreclosure. the stress of mortgages gone bad is leading to a new trend calling strategic defaults. these are people who can pay their mortgage, but they stopped because the value of the home is worth less than the loan. who are these people? you might be surprised. the credit bureau es peer yan tells us the average strategic defaulter has multiple mortgages, higher origination balances, a third almost live in

california and expeeren found they have higher incomes, higher credit scores and higher financial literacy. is it okay to just walk away from the mortgage? david flores joins me now, a credit counselor at green path debt solutions. help me understand the two reasons why you say people do this? >> the two reasons are this -- one, two try and leverage with the bank to work with them on a modification. >> i'm walking away unless you can work with me. >> right. the other reason is, simply because they want to be able to take advantage of the slow, drawn out foreclosure process, live in a home -- >> for free? >> for free. >> some cases people own a different home, renting out the other home they're not paying the bills on and collecting rent. that's something that's happening too. one thing i found interesting from the data, these are people with higher credit scores, higher incomes. they would seem to have better financial literacy.

that's why it's a strategic default. >> i think the information out there, there's a lot more information out there regarding what the banks -- what you need to do in order to qualify for a loan modification and so there are a lot of attorneys out there, organizations, who are feeding that information. >> there's a cottage industry of we'll take your money to help you strategically default. margaret kelly from remax, you're on the front lines. what do you think has to be done to keep people who want to stay in their homes in their homes, paying their bills, and not strategically defaulting or is it ever okay to walk away from your financial obligations to the bank if there's no hope, you're so under water, no hope you're ever going to get out of it? >> well, that's a moral and ethical question that i think each person has to address, but what we need to do is loosen up the jumbo mortgages and allow the higher-end mortgagies to be able to adjust their mortgages. it's interesting, you talked about it's the higher end.

for those people with mortgages of 50,000 or below only 6% strategically default. if you are over a million dollars on your mortgage, 33% are strategically defaulting. >> why is that? >> because more than likely they've paid way too much for their home, they don't see that they're ever going to get out of the negative equity position, and they equity position, and they have, as you said, it is strategic. they have thought about it and said, it is better to walk away than to sit here and continue to make payments, because i will never get the money out of this home. >> jim carr, i want to bring you back into the situation. one of the things here, subprime borrows, many have been blown out and foreclosed on in the past few years. it's ironic now the people who are still living in their homes and not paying their bills are people who have high credit scores and high financial literacy. >> right, it's very interesting. and i think the term "strategic" is really key here. because a lot of people really have a perception that maybe those are lower income households, but really it's higher income households, and probably one of the reasons they

do it in addition to those reasons that have already been given is that they have other wealth they can rely on to continue to function in the economy, even though they have this serious ding against their credit score. because a strategic default is going to hurt you with respect to your credit score. and as you know, you need a credit score for practically everything these days. you can't afford to lose more than 100 points and continue, unless you've got a fair amount of assets that you can rely on. the other thing -- >> go ahead. >> i was just going to say, it's important to recognize that in many markets, consumers are upside down not by 5% or 10%, because that's not really where the problem is, it's in those markets where consumers are upside down in their loans by 25% or even 50%. and in those cases, many people are walking with away simply because they can't estimate the day of which their home will ever be worth what they paid. so, again, it is a moral issue. it's also a legal issue. but the reality of it is, if you owe 50% more on your mortgage than the home is worth, a lot of folks are saying, well, this is

clearly just a dead loss. i might as well take the ding on the credit score and go forward from there. >> especially if you have multiple mortgages, which is what the experian data found. if your credit score is going to take a hit, it's already like you're living in one home. and also, they found that 90% of these people were paying all of their other bills. all of them. so from the credit rating point of view, your score falls, but with an asterisk, because you're paying all your other bills. that makes you still a good candidate for all the credit products that the banks are trying to sell you, jim. >> well, not necessarily. you still -- strategic default means you intended to do it. you could have paid that bill. you're going to be treated a lot less favorably by the credit scores than you would if, in fact, you defaulted because you literally had hard times, you know, you lost your job. the other thing i think it's important to recognize is that depending on whose numbers you're using, the number of households that are upside down range between 23% to 28%.

that's a huge number. so further drops in house prices, you know, the conversation we were having earlier, if that happens, the potential for more strategic defaults is -- could, in fact, grow. >> okay, guys, stick with me for a minute. there's so much more to talk about. jim, margaret, david, stay with me. what will it take to fix the housing market? real answers, next. then have salad and biscuits followed by 1 of 7 delicious entrees and finish with something sweet all for just $15. right now at red lobster. really? 25 grams of protein. what do we have? all four of us, together? 24. he's low fat, too, and has 5 grams of sugars. i'll believe it when i--- [ both ] oooooh... what's shakin'? [ female announcer ] as you get older, protein is an important part of staying active and strong. new ensure high protein... fifty percent of your daily value of protein. low fat and five grams of sugars. see? he's a good egg. [ major nutrition ] new ensure high protein.

ensure! nutrition in charge!    new ensure high protein. any questions? no. you know... ♪ we're not magicians ♪ we can't read your mind ♪ ♪ read your mind ♪ we need your questions ♪ each and every kind ♪ every kind ♪ will this react with my other medicine? ♪ ♪ hey, what are all these tests even for? ♪ ♪ questions are the answer ♪ yeah

♪ oh

before housing recovers, we have to have confidence. but confidence is in short supply. 15% of americans think the housing market will recover next year. that's 15%. 24% say 2013. and you can see from this pie chart that most of them, 54%, think the housing market won't recover before 2014. jim carr, can the government, should the government fix the housing mess? >> yes. so there are three components of this housing market problem.

first is the foreclosure crisis that continues, the federal interventions so far have just been woefully inadequate, and there's a lot more that can and should be done. in fact, going back to our conversation on strategic default, the failure of a lot of these loan modification programs is one of the reasons why people are going for it with strategic defaults. the second is that we need to repair the housing market, meaning put new rules in place that make sure that loans are sustainable. but we need to make sure that we don't put rules into place that are so onerous, that they go beyond repairing the market and really dampening further home buying demand, because that will simply slow the housing mark's recovery. and the third piece is unemployment. unemployment has been the largest driver of foreclosures for the last two or three years now, and so failing to get america back to work is going to be harmful to the housing market going forward. >> you know, margaret, we know the solution to the housing crisis. it's confidence. only, we don't know what it's going to take to get the confidence back. maybe knowledge or financial literacy is part of it. the consumer financial

protection bureau has unveiled the know before you owe. take a look at this. these are two prototypes of a simple two-page mortgage form that replaces the existing, with often confusing skplent and len mortgage document. >> unfortunately, years ago, the lending practices were way too loose. you could get a mortgage without anything down, without proving income. i think the pendulum has swung too far the other way, where lending practices now are way too tight. we have to get back to common sense, good lending standards. we have to increase confidence and the best way to do that is let's get private sector jobs. let's get people employed again. because people who have jobs, they buy homes, they stay in homes. >> and people who are confident in their job. >> absolutely. that they know they're going stay in it. and the third is, this whole distressed property glut that we have or shadow inventory, it is going to take a few years to

work through the system, but once those are gone, we are back to a normal housing market. >> you know, david flores, you counsel people who are trying to get out of debt. and they're trying to triage all of these bills and decide what to do and whether they should rent or buy and if prices are going up or down. david, is it jobs, the thing that we need to really help this situation? >> well, i think it's a combination of jobs and, as you said, financial literacy. i think a lot of consumers got into mortgages that they simply could not afford, but didn't understand that they couldn't afford them. >> do you like that two-page document? >> do i like it. i would like, obviously, as a financial counselor, for the lender not to be the one to go over -- or only the lender to go over that information. but a third party who is, you know, neutral to the situation, so that they can give them real answers and real advice. >> all right. david flores, margaret kelly, thank you so much for joining us today, as well as jim carr. nice to see all of you today. and let's keep talking about ,