From Newsday:
Experts predict more pain before housing rebounds
Problems in the real estate market are going to get worse — much worse — before they better, experts say.
Home prices will keep falling and foreclosure rates nationally will keep rising at least until the end of next year, they said. And some predictions contend that the market won’t right itself until 2010.
“We are going to have a huge correction,” said David Olson, president of Wholesale Access, a mortgage research and consulting firm based in Columbia, Md. “There’s going to be a lot of pain.”
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No one knows yet the extent of the problem. Just last week, Goldman Sachs published a report predicting home prices will fall an additional 13 to 14 percent over the next three years. And, the report notes, the peak of subprime mortgage rate resets won’t come until March. In that month, the interest rate on $42 billion of mortgages will increase, straining the budgets of many homeowners.
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Nearly 150,000 subprime mortgages are scheduled to reset each month through the end of next year, according to the Federal Reserve, causing the typical monthly payment to rise about $350, or 25 percent. Goldman Sachs, meanwhile, predicts that losses on outstanding loans could balloon to $400 billion, though some experts feel that number is too high.
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“The hardest thing is to make the borrowers most at risk fully aware of the risks they face and aware of the opportunities to help ameliorate that risk,” Gumbinger said.For the most part, however, experts say the country will just have to ride out the troubles in the market. Housing prices should stabilize once they come more in line with incomes. Foreclosure rates should stop soaring once the surge of resets on adjustable-rate mortgages passes.
“We’re just going to have to wait this through,” Olson said.