The 94th Annual Convention of the Mortgage Bankers Association passed without a notice from most people, but some important forecasts were made by the mucky-mucks who attended. In particular, Doug Duncan, chief economist for the MBA made some gloomy short term predictions for the mortgage and real estate industry but predicts an end is in sight come 2009. Some highlights from Duncan's forecast (these are national predictions) presented last Wednesday include:
- Total mortgages written are expected to decline nearly 15% this year (2007), 18% next year (2008), and only 6% in 2009.
- In 2008, mortgage originations will drop below the $2 trillion mark for the first time since 2000.
- The mortgage industry has already lost 60-70,000 jobs which may increase to as much as 110,000 job losses which decreases the total mortgage industry employees from 505,000 to 400,000 or less.
- Home sales will decline 12% this year and 10% next year in which the bottom will be hit in the third quarter. Duncan then predicts an increase in sales in 2009 by 5%.
- Home prices will decline 2% both this year and next and finally prices will flatten in 2009. Adjusting for inflation could make the real cost of housing fall 7-8% both years (The Case-Schiller Home Price Index for the Minneapolis area already shows a 3.4% decrease over last year as of July, 2007.).
- "Any significant increase in homebuilding is probably years off" because of the current excess inventory in houses for sale.
- Housing starts (new construction) will fall to 1.16 million next year which is 35.5% less than 2006 and trend back up in 2009 to about 1.27 million.
- Housing is "clearly in a deep recession" although other economic indicators remain sound.
Doug Duncan's forecast is gloomier than the chief economist for the National Association of REALTORS®, but in some ways I'd rather have the worst case scenario. If I prepare for the worst and it doesn't happen, then I will be pleasantly surprised to have good fortune smile on the real estate industry! ☺
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