A Wall Street Journal article says that the housing market remains clouded with many more foreclosed homes expected to hit the market later this year and over one million more next year. Banks working on modifications that will ultimately fail will release a torrent of new foreclosures.
Following is a Moody report (how appropriate is that name? Moody. I’d be moody too handing out all the doom and gloom).
“Moody’s Economy.com predicts that 1.9 million homes will be lost to foreclosures or related defaults this year and another 1.1 million in 2011. That compares with two million last year and 600,000 in normal times.
Unemployment remains high and is unlikely to improve much soon, some economists say. Mark Zandi, chief economist at Moody’s Economy.com, expects the unemployment rate to be 10.2% at year’s end, up from 9.7% in March. At the end of 2011, he sees a still hefty 8.6% rate.
Credit conditions, already tight, will get tighter in at least one respect. Around a third of home sales in recent months have been financed by loans insured by the Federal Housing Administration, which allows down payments as low as 3.5%. But now, the FHA is tightening its terms somewhat.
By early summer, the FHA plans to reduce the maximum amount a seller can contribute to the buyer’s closing costs—such as loan-origination, legal and appraisal fees—to 3% of the home price from 6%. That means buyers will have to save more to meet closing costs. Mr. Burns said a survey of builders by his firm found they expected the FHA change to eliminate as many as 15% of potential buyers.
Many economists expect rates on standard 30-year fixed-rate mortgages to rise at least moderately from the recent level of 5% to 5.25%. Mr. Zandi expects a rate of about 5.7% by year’s end”.
And thus saith Moody.