Foreclosures will peak by the end of next year and unemployment will climb above 10 per cent as the housing market and US economy grapple with the aftermath of the recession, the Mortgage Bankers Association’s chief economist has said.
Jay Brinkmann's forecast, released at the trade association's annual convention and expo in San Diego late on Tuesday, envisions a slowly growing economy and improving housing market. Home price declines will abate and fixed mortgage interest rates stay below 6 per cent, he feels.
But the strength of any rebound will hinge on whether consumers — many still concerned about job security — will ramp up spending, the economist noted.
"The recession is behind us but the effects of the recession will linger for some time in the form of higher unemployment and lower levels of business investment and home construction," Brinkmann said.
Many lenders have issued a moratorium on foreclosures, causing a drop in the number of discounted, bank-owned properties hitting the market this year. But some economists expect that a wave of foreclosed properties could hit the market in 2010, dampening home prices again.
Those delayed bank-owned properties aside, rising unemployment will lead to a growing number of foreclosures at least through the end of next year, Brinkmann said.
Foreclosures have helped power sales in many ravaged markets, particularly in the West and Florida.
"We still see a concentration in the lower end of the market," Brinkmann said. "Entry level homes are in demand."