Oregon Mortgages

Housing Predictions for 2007!

So that time has come again, where all of the economists get out their crystal ball and predict what the future has instore for the 2007 housing market. Kind of ironic to me, however, I was an economic major in college so I get a little kick out of all of it.

The housing correction last year subtracted 1.2% from Gross Domestic Product numbers in the third and fourth quarters of 2006. This decline should end by years end but further job consolidations should be expected by homebuilders, real estate agents, and mortgage brokers… That is great to hear of course, however, not so great for those in the business who might not have jobs much longer. With the refi boom that happened a while back and all of the building that went on we saw a lot of people join the industry but with the slow down we’ve already seen a number of people leave and most of us figured we would see a lot more still get out.

Inventories of new homes have begun to decline and we’re down to 5.9 months supply compared to 7.2 in July. One thing to note is that the figures are from when a contract is signed so if the deal falls apart for whatever reason that is not reflected in the data. So of course there is some room for error in there. Just to give you an idea in the Fall of ‘06 cancellations were at 30% which is a hefty number. I’m thinking they need to revise how they are gathering the data. Also one thing to keep in mind is that these are national averages and numbers can change depending on your location and economic condition of where you reside.

With excess in inventory seller’s are starting to realize that they are not in control of the market any longer and that they will have to be more competitive with pricing or lower their pricing. That is good news for all of you who are wanting to purchase. It’ll be easier to get the seller to take a lesser sale’s price or opt to include your closing costs for you. It’ll give you and your agent more bargaining power.

There are also less new homes being built and put on the market. This in turn will help ease the inventory build up. That won’t happen overnight but it should ease up by the end of 2007. Just a note we’ve seen tighter guidelines appear throughout the mortgage industry due to number of mortgage’s being defaulted on rising so if you are wanting to buy a home definitely pay attention to your credit situation.

I’m posting some interesting information that I directly pulled from the report that I was reading. I felt it was better to simply repost it rather than summarize it.

“Other projections are that the ARM share of all mortgage originations will fall to 13 percent this year but will recover, perhaps to as much as 15 percent in 2008 as the interest rate yield curve widens a bit.

Housing starts will be 10 percent lower in 2007 than in 2006, totaling around 1.62 million units as builders work off inventories. Builders will come back, however, in 2008 with starts running around 1.70 million.

Home price growth will drop further to 3.3 percent in 2007 and remain constant at that level through 2008. It is important to note that this still represents an increase in home prices merely a slowing of the rate.

Mortgage originations are forecast to drop about 6 percent in 2007 to $2.5 trillion and fall yet another 1 percent the next year. This will largely reflect a fall-off in refinancing activity.”