Doug Duncan, chief economist for the Mortgage Bankers Association predicts that the housing market will not see any relief until 2009. He believes that our country will see a 2 to 4 percent decrease in median house values before the market rebounds. The decline of the housing market can be blamed on an increase of foreclosures, a large oversupply of homes for sale and lenders tightening their underwriting guidelines.
Duncan believes that some areas will hold their own, however predicts California, Texas, Arizona , Nevada, Ohio, Michigan and Illinois to be hardest hit because of investor speculation during the housing boom or job loss.
He also believes that there will be a 22 percent drop in new home sales and a 12 percent drop in existing home sales this year and an additional 10 percent in 2008.
The sub prime mortgage crisis not only has adversely affected homeowners. There have been 60,000 to 70,000 related layoffs in the mortgage industry workforce with an additional 30,000 to 40,000 expected.
In addition, due to the oversupply of existing home sales, increase of new homebuilding is years away. Presently homebuilders are experiencing the weakest buyer traffic in 23 year history. Builders have reported that while their sales incentives have sparked interest, they have found that potential homebuyers are hesitant due to report of declining home values.
The writing is on the wall, the sub prime mortgage crisis has put the housing market in serious trouble, and the decline is expected to continue, which carries a significant risk to our economy. The longer the housing market remains sluggish or continues to decline, the longer the effect on our future economic growth.
Hank Paulson, Treasury Secretary, along with Alphonso Jackson, HUD secretary, have been asked by President Bush to work to modify at risk mortgages. Although they are willing to help troubled borrowers, their position is that they will not reward past risky behavior.
” Hope Now”, a new alliance of mortgage servicer’s was created to reach out to troubled borrowers and help them find solutions to their mortgage problems. It isn’t as easy as it would seem, even though the resources are available to assist homeowners, 50 percent of the struggling borrowers just don’t contact their lenders to address their problems. The reluctance of admitting they are having trouble is doing nothing but hurting them.
Freddie Mac and Fannie Mae have been asked to work closely with lenders to make affordable mortgage products to provide a way for those with risky adjustable rate mortgages to refinance.
Going forward, Paulson wants to ensure that mortgage loan originators maintain their integrity by establishing nationwide licensing, continuing education and monitoring systems for mortgage brokers and loan officers. Paulson suggestion of additional regulation, and holding the entire mortgage industry accountable, will no doubly combat predatory lending, and prohibit unfair and deceptive lending practices.
It is important to note that Paulson will not excuse borrowers from their role in this mortgage crisis. Securing a mortgage loan is a complex problem, however there is no excuse for borrower’s failing to exercise their own due diligence.
It is important to note, that the sub-prime borrowers who acted irresponsibly by purchasing homes that they could never have afforded are at the heart of this crisis. As a result a ” bail-out” plan has been kicked around, but keep in mind that it will be YOUR taxes dollars that will reward those that have caused this mess.
Not everyone will be affected, there is good news for those that fall into the ” conventional and conforming” mortgage transactions or those that have good credit, apply for a 30 year fixed rate and keep their loan under $417,000.00