No worries here, straight from the devil’s mouth:
“The study provides relevant context and perspective on the current state of the economy and its implications for the housing and mortgage markets,” says Doug Duncan, MBA’s chief economist and senior vice president for research and business development. “In order to understand the developments with respect to trends in mortgage product choice and mortgage delinquency and foreclosure rates, one needs to understand the underlying economic trends.”
Key findings of the study include:
*The U.S. economy will continue to grow in 2007, but at a slower pace growth.
*The housing market will regain its footing by mid-to-late 2007, depending on what measure is used. Home sales and starts will likely begin to increase in mid-2007, but, given the large inventory overhang, prices are unlikely to show any significant increase until late 2007 or early 2008.
*The residential finance market is fundamentally sound and working efficiently. The housing market will continue to benefit from relatively low long-term interest rates. For ARM borrowers, we expect short-term interest rates to be steady going forward.
*Mortgage originations will fall in 2007 relative to 2006 as a result of a decline in home sales and diminished refinance activity.
*Barring any unexpected downturn in the economy, the recent increase in mortgage delinquency rates will likely peak by the end of 2007, but at levels well below those of past peaks. This lower peak will come despite the change in the composition of outstanding loans, namely a larger proportion of subprime loans in recent years.
I suppose we’ll have to see in the later half of ’07 whether they were right or not. We’ll be revisiting this one for sure.
Doug Duncan sold his house in 01/05 and is renting, waiting out the bubble. From the Los Angeles Times.
“The chief economist for the Mortgage Bankers Assn. is worried enough about the torrid housing market to get out of it.
“I’m going to rent for a while,” said Douglas Duncan, who expects “significant reversals” in regions that have enjoyed strong home price appreciation, including Washington, D.C., Florida and California. He plans to sell his suburban Washington home, which has tripled in value since he bought it a dozen years ago, and move into an apartment.
Duncan is among a multitude of experts and consumers across the country debating the possibility of a housing bubble — a condition where prices have risen so far out of hand that they eventually crash.
It’s a human temptation to stay in the game until the last moment. But Duncan, the economist for the mortgage bankers, doesn’t seem to feel it. Workmen are prepping his home now for a sale, he said.
Acting on his gut has served him well before. In 1988, as the economist was moving to Washington, he went to look at a house that was for sale. Three couples were already there. They started a bidding war in the living room.
“This is irrational behavior,” Duncan remembers thinking. He decided to rent. Shortly afterward, the market crashed.
In 1993, he decided it was a good time to own. The price he paid for his house was about a third less than the previous owner, who had lost it in a foreclosure sale.”