From the Philly Inquirer:
Volatility in the mortgage markets. Rising foreclosure rates and delinquencies. Increasing existing-home inventories. Weak demand for new and existing homes, and lagging construction. Continued price declines.
Not a good week for housing, which PMI Group Inc. chief economist David Berson says “historically leads the economy out of a recession.”
Berson did not say it would be easy. He and other economists, including Economy.com’s Mark Zandi, caution that the housing market must stop falling before it reverses course, probably by mid-2010.
Not that the road will be smooth. For example, unexpected volatility in the Treasury market yesterday widened the yield gap between 2-year and 10-year bonds to a record 2.76 percentage points.
When 10-year yields rise, so do fixed mortgage rates, and those numbers gyrated wildly for most of the day, sometimes gaining and losing as much as three-quarters of a percentage point in an hour, brokers and analysts say.
When the dust cleared, unnerved investors had driven the Dow down 173.47 points. Thirty-year fixed mortgage rates then settled in at 5.375 percent, with no points, up half a percentage point from 4.875 percent a few days ago.
About 10.6 percent of the mortgages in Florida are in the foreclosure process. Pennsylvania’s rate is 2.39 percent; New Jersey’s is 4.32 percent.
Many of the moratoriums that delayed foreclosure proceedings expired when President Obama debuted his rescue plan for nine million bad mortgages – effects of which Zandi maintains will not be evident until the second or third quarter.
“Sadly, it validates that none of the current foreclosure-prevention programs is working at all,” said Rick Sharga, chief economist of RealtyTrac Inc. “Any program that doesn’t include some sort of forgiveness or long-term deferral of principal balance simply isn’t going to be effective.”
There also has been a major shift in the bad-loan category from subprime to prime, which “points to the impact of the recession and drops in employment on mortgage defaults,” Brinkmann said.
Kyle McGee went to his mortgage broker’s office yesterday hoping to refinance and save about $200 a month. He walked away empty-handed.
McGee was expecting a rate of 4.7 percent; the broker offered him 5.375 percent. The average 30-year fixed-mortgage rose to 5.08 percent May 27, according to Bankrate.com.
“We feel like we might have missed the boat,” said McGee, 37, an adjunct professor of social work at Hunter College School of Social Work in Manhattan.
Federal Reserve Chairman Ben S. Bernanke’s efforts to bring down borrowing costs to revive the housing market and help the economy are stalling. Mortgage rates are almost back to where they were in March before the 30-year rate fell to a record and sparked a refinancing boom. Mortgage delinquencies rose to a record 9.12 percent of U.S. home loans and house prices dropped the most on record in the first quarter, industry reports show.
“Housing is not going to be the engine to get us out of this recession,” said Robert Eisenbeis, chief monetary economist for Vineland, New Jersey-based Cumberland Advisors Inc., and former research director at the Federal Reserve Bank in Atlanta. “They’ve squeezed a lemon and now they’re trying to squeeze some more, but you can only get so much juice out of a lemon.”
From the AP:
A record 12 percent of homeowners with a mortgage are behind on their payments or in foreclosure as the housing crisis spreads to borrowers with good credit. And the wave of foreclosures isn’t expected to crest until the end of next year, the Mortgage Bankers Association said Thursday.
The foreclosure rate on prime fixed-rate loans doubled in the last year, and now represents the largest share of new foreclosures. Nearly 6 percent of fixed-rate mortgages to borrowers with good credit were past due or in foreclosure.
At the same time, almost half of all adjustable-rate loans made to borrowers with shaky credit were past due or in foreclosure.
President Barack Obama’s recent loan modification and refinancing plan might stem some foreclosures, but not enough to significantly alter the crisis.
“It may be too much to say that numbers will fall because of the plan. It’s more correct to say that the numbers won’t be as high,” said Jay Brinkmann, chief economist for the Mortgage Bankers Association.
From the Boston Globe:
Mortgage delinquencies and foreclosures rose to records in the first quarter and home-loan rates jumped to the highest since March this week as the government’s effort to fix the housing slump lost momentum.
The US delinquency rate jumped to a seasonally adjusted 9.12 percent from 7.88 percent, the biggest-ever increase, and the share of loans entering foreclosure rose to 1.37 percent, the Mortgage Bankers Association said yesterday. Both figures are the highest since 1972.
The housing decline is proving resistant to efforts by the Federal Reserve and the Obama administration to keep owners current on mortgages by allowing them to refinance or sell. Prime fixed-rate home loans to the most creditworthy borrowers accounted for the biggest share of new foreclosures at 29 percent, MBA said, a sign job losses are hurting homeowners.
One in every eight Americans is now late on a payment or in foreclosure, the MBA said.