Subprime delinquencies may rise into 2009: NAR
Thu Jun 12, 2008 1:29pm EDT Email | Print | Share| Reprints | Single Page | Recommend (0) [-] Text [+]
By Jim Loney
CORAL GABLES, Florida (Reuters) - The delinquency rate on U.S. subprime mortgages may continue to rise into next year, the National Association of Realtors' chief economist said on Thursday.
However, there are signs the subprime crisis may be peaking, Lawrence Yun told a meeting of real estate professionals in Coral Gables, Florida.
"I anticipate the subprime delinquency rate to continue to rise for the rest of the year and probably into the first quarter of next year," Yun said during a presentation on current market conditions.
The delinquency rate on subprime loans is running around 20 percent.
"I would not be surprised if it reached even closer to 25 percent," he said after the speech. "But the pace of increase will be moderating."
How much, he said, will depend largely on housing prices.
The bursting of the U.S. housing market bubble has thrust the U.S. economy to the verge of a recession as lenders sharply curtailed credit, foreclosures soared and consumers, a main engine of economic growth, began to ease back on their spending. The reverberations have been felt around the world.
Yun said that among the positive signs that delinquencies may be nearing a peak was the drop in the number of adjustable rate loans that were resetting and the rise in the number of safer Federal Housing Administration loans.
In addition, many speculators have already defaulted and rates on so-called "jumbo-conforming" loans -- big mortgages that Fannie Mae and Freddie Mac were authorized by recent legislative changes to finance -- are improving, he said.
With U.S. housing market activity at a 10-year low, pessimistic "psychology" is driving the market, said Yun, who represents the largest U.S. real estate agents group and is known for his optimism despite the worst housing downturn in generations.
"There are many people who probably have the capacity to buy a home but they are not buying, they are sitting on the fence," he said.
Foreclosure rates nationwide, historically around 1 percent, are now running around 2 percent, he said.
According to NAR statistics, the cities with the highest subprime origination rates were Detroit, Miami, Riverside in California, Cape Coral in Florida, Orlando, Las Vegas and Phoenix.
He called Florida's property market turmoil a "short-term slump" resulting in part from "gamblers" speculating on real estate, and from a "short-term oversupply."
The south Florida market has been one of the hardest hit in the nation, due in part to the overbuilding of condominium units, subprime lending and widespread mortgage fraud.
At one point during the peak of the market, Miami, a city of about 400,000 people, had 60,000 condo units in some stage of planning or construction. Thousands of those units are due to come to the market in the next 12 months.
Yun said an NAR analysis found a huge variation in south Florida neighborhoods. Prices in those with few subprime loans were holding up well, while others with large subprime exposure had fallen more than 35 percent.
"Location, location, location is making a bigger difference than ever," he said, forecasting that by 2013 property owners in Miami could see price appreciation of 20 percent or more from today's levels.
Yun spoke at a real estate congress sponsored by the Realtor Association of Greater Miami and the Beaches.
(Editing by Michael Christie; Editing by Tom Hals)
I never knew that
