Pulse of the U.S. Housing Market
posted on: March 16, 2008
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Given that the housing market malaise is the prime culprit for our economic and market adversity, I decided to post some charts showing key indicators such as delinquencies, foreclosures, and inventories. Sources for this data are Countrywide Financial (CFC), which has the nation's largest mortgage servicing portfolio ($1.48 trillion), and the National Association of Realtors, which tracks home sales.
First up, Countrywide's mortgage delinquency rates and pending foreclosure rates for the last twelve months:
As you can see, delinquency rates have stabilized in the last few months, with foreclosures still headed higher, but not severely. While certainly a good sign, we can not call it a trend just yet. After all, last summer we saw a leveling off, only to see another spike shortly thereafter.
The next chart is home inventories, I believe a key proxy for the future direction of home prices. We will not see stabilizing home values (and eventual gains again) until we work through very high inventory levels. Typical inventories levels are about 50% below current levels.
Again we see a curtailment of rising inventories in recent months, but I still do not think we can call it a long lasting trend of stabilization as of yet, given that we will not pass the peak in ARM rate resets for the next quarter or two.
But let's assume for a moment that these indicators do stop getting worse in coming months. Does that mean the housing market will stabilize also? Probably not. Inventories need to come down. The only way we get that is by increasing demand. With home buyers now needing the "trifecta" to get a mortgage loan application approved (good credit, proof of steady income, and money for a down payment), demand won't outstrip supply unless prices come down further to get qualified buyers to pull the trigger in greater numbers.
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This article has 9 comments:
If they cannot do that, lenders will not give them the time of day, even after these terrible times in the housing market are behind us, as the memories of it will linger on.
No more zero-down (or 5 per cent down, or even 10 per cent down) mortgages should be expected until a new generation of lenders arrives, eager to repeat the mistakes of their predecessors.
Cheap mortgage money is not the answer -- a robust economy and different mindset toward buying a home is.
Not to mention the realism is, Mortgage backed securities are not favorable if housing prices keep tumbling. Who will buy stock on a company that is loosing money? The same goes with Mortgage backed securities, nobody wil invest if profits can't continue to be made on homes. Its not just about the good credit that these securites can look good for investors because even those with good credit today will foreclose if they see their most cherished investment going down the toilet!!!