Posted by & filed under Stockton Real Estate.

By Mandelman


Our housing markets are now heading directly into the perfect storm and those in the real estate and mortgage industries would be well advised to get prepared for the downturn now. I dislike being an alarmist, but I am officially sounding the alarm.

This past September signified the fourth straight month of a decline in existing home sales, while mortgage interest rates hit two-year highs. The Mortgage Bankers Association index of mortgage activity is now at its lowest point since November of 2008, which was probably the nadir of the financial crisis and resulting Great Recession.

In the early part of September, Bloomberg reported that Bank of America, the second-largest U.S. lender, had announced that it was eliminating about 2,100 jobs and shutting down 16 mortgage offices citing lower loan demand as the reasons for the layoffs. And Wells Fargo & Co., the biggest U.S. home lender, plans more than 2,300 job cuts, announcing in September that it expects to originate 30 percent fewer home loans this quarter.

The bottom-line is that, according to a recent study by Goldman Sachs’, purchase mortgage origination has fallen from $1.5 trillion in 2005, to around $500 billion in each of last two years. Aggregate demand is simply down for what should be obvious reasons (that I’ll describe anyway,) and now that the pressure is on to reduce stimulus programs, prices will soften and once again begin to fall.

And that’s the good news.

What is pushed down… must go back up.

And when it does, what went up… must come back down.

As I explained in an article this past August, at the end of 2010, the interest rate on a 30-year mortgage was 4.97%. Over the next 28 months actions taken by the Fed pushed that rate down and as of last April, it reach a low of 3.42%. Quite predictably, not only was this last refi boom born… but in addition demand for homes went up… and prices followed.

But that’s all over now… in fact, it ended last July.

It was the third week of June when Fed Chari Bernanke dropped the infamous and not-so-subtle hint that the Fed would soon be “tapering” off on its quantitative easing program, and almost overnight, interest rates started rising. June was also the month that FHA loans became more expensive and somewhat harder to get.

On August 23, 2013, the <a class="colorbox" …read more

Leave a Reply

Your email address will not be published. Required fields are marked *