Wednesday, January 03, 2007 4:10 PM
2007: Housing Slowdown Good for Foreclosures
posted by
joelc
The cooling real estate sector will continue to plague the national economy next year, but enough positive economic fundamentals remain in place to counteract forces threatening to push the U.S. housing market into a full tailspin, according to forecasters at Chapman University in Orange, Calif.
That means 2007 should be a good year for anyone involved in the foreclosure sector of the market — whether they are real estate agents, potential home buyers or real estate investors.
Some highlights of the Chapman forecast:
- The sky isn’t falling, but housing prices are projected to decline 2.2 percent on average next year, after an almost 50 percent run-up in appreciation between 2001 and 2006, says the Chapman Economic & Business Review December 2006.
- Housing starts are expected to remain down in many parts of the country, due to increased marketing time and inventories of unsold homes that grew from a 3.7-month supply in 2005 to a 7.3-month supply in 2006 at the national level. That is still much lower, however, than the market’s peak of an 11- to 12-month supply back in the early 1990s, when foreclosures were rampant.
- Mortgage rates increased 15 percent between 2005 and 2006, but economist and Chapman President James L. Doti expects the Federal Reserve to hold fast in 2007, keeping the much-watched Federal Funds Rate (the short-term rate at which banks lend money to each other) at or near its current 5.25 percent.
Lower home prices and slower sales activity, combined with growing inventories of unsold housing, will make it more difficult for distressed homeowners to sell off their properties to avoid foreclosure. Higher mortgage rates will have an effect too — as rates are reset to higher levels on those “exotic” adjustable mortgages.
Therefore, looking at the year over year growth between 2005 and 2006, and the expected increase in foreclosures due to the upward adjustment in interest rates on adjustable loan products, we expect the supply of foreclosure information reported on the RealtyTrac website to continue to grow next year.