by Dan Krell © 2009
If the real estate industry is waiting for a wakeup call, it may be coming in May 2
010. Three events that are expected to either end or peak next May include: the Fed’s discontinued purchases of mortgage backed securities, end of home buyer credit, and expected foreclosure increases.
In a November 19th press release, the Mortgage Bankers Association (mbaa.org) reported that delinquencies on residential mortgages have increased to 9.64% for the third quarter of 2009, which is a 40 (basis) point increase from the second quarter of 2009 and a 265 (basis) point increase from the same time last year; the overall foreclosure rate is up 35 (basis) points from the third quarter of 2008. The report claims that FHA and “prime” mortgages make up the bulk of the delinquencies. MBAA Chief Economist Jay Brinkman stated in the press release that “because mortgages are paid with paychecks” increased unemployment will “drive up delinquencies and foreclosures” [increases].
As delinquencies and foreclosures are expected to peak next year, both the home buyer credit and Federal Reserve purchases of mortgage backed securities are expected to end in April 2010. What? Yes, not only is the home buyer credit is to end, Steve Cook of the Real Estate Economy Watch reported that the National Association of Realtors agreed to not ask for another extension of the home buyer credit (www.realestateeconomywatch.com/2009/11/the-last-days-of-the-homebuyer-tax-credit).
The Fed has been buying mortgaged backed securities to ease the market and keep mortgage interest rates low. The program, that began earlier this year, is expected to end as the Fed slowly eases up on the mortgaged backed securities (also reported by Steve Cook).
We are anticipating seeing if the programs to forestall a real estate disaster have done what they were supposed to do. So, we may wake up to a gentle alarm clock next spring or a trumpet blasting in our ear.