Foreclosures May Accelerate as Unemployment Rises

San Francisco, CA, Oct. 22, 2008--If 2008 was a record year for home foreclosures, next year could look even worse as job losses mount, the chief economist of the Mortgage Bankers Association said on Tuesday.

A recession appears to be underway, according to the MBA's annual economic forecast, which projects economic contraction through the middle of next year. The MBA presented its forecast to reporters Tuesday at its annual convention, being held in San Francisco.
     
Unemployment also will likely accelerate, perhaps reaching 7.7% by the end of next year, making it tougher for some people to stay in their homes, said Jay Brinkmann, chief economist of the MBA.

He also said Unemployment won't decline until late 2010, according to MBA projections.

And while new-home production has decreased, the housing market will still continue to struggle with high inventories of for-sale properties. "Even though we see the new-home inventories falling, we see existing-home numbers increase," Brinkmann said.

No surprise, then, that he also doesn't expect home building to ramp up again soon: New-home sales will be down by 36% this year, compared with last year. Next year, new-home sales will be down by 12% -- though perhaps reaching a bottom in 2009.

Sales are expected to rise 25% in 2010.

Meanwhile, existing-home sales will be down by 13% this year compared with 2007, but should increase 3% in 2009. According to MBA projections, existing-home sales could be up 6% in 2010.

The MBA projects the 30-year mortgage to average 5.8% in the fourth quarter of 2008, 5.7% in the first through third quarters of next year, and 5.6% in the fourth quarter of 2009.

But as favorable as mortgage rates may be, for many would-be homeowners that might not be enough. That's because people's chief reason for not making a home purchase may no longer be related to fear of home-price declines or stricter lending standards. A bigger reason could have to do with their job security.

Total residential mortgage production in 2009 is expected to be $1.67 trillion, down from $1.86 trillion in 2008 and $2.3 trillion in 2007, according to the MBA.