Mortgage Market Won’t Bottom Until Next Summer
From Staff Reports
The already ailing U.S. mortgage market is going to get worse through the remainder of this year, according to an analysis released late last week by Moody’s Economy.com. And it won’t turn around early next year, either, the study says.
The Pennsylvania econometrics researcher predicts that 2.5 million first mortgages will default this year. And the market will get worse – much worse – before it gets better. By next summer, Economy.com says that 3.6% of all outstanding mortgage debt will be in default, up from only 2.9% in the first quarter of this year.
Chief Economist Mark Zandi says that the “economic fallout will be substantial,” but will be allayed a bit by a strong jobs market.
Naturally, the subprime adjustable-rate mortgages (ARMs) market will be the worst hit. Economy.com expects foreclosures for those loans to hit 10% of the total by the middle of next year. That’s up from a current foreclosure rate of 4% for the group, and will be four times the default rate of 2.5% for 2005.
