Mortgage News

The mortgage market is being hit by a quadruple whammy these days. First, the U.S. Census Bureau is reporting that a total of 18.6 million homes stand empty today, more than ever before recorded. Worse, the Sydney Morning Herald is reporting today that the largest credit firms have reported a total of $467 billion in credit losses and asset writedowns. The Herald also reported that roughly $5 trillion of U.S. home loans (roughly half of the entire market) are either of the subprime variety or are rated Alt-A, "a classification of mortgages where the risk profile falls between prime and subprime."

Combine this with the news that single family home sales are down 3.2%, wiping out 2% gains from a month before, along with the fact that mortgage interest rates jumped from 6.26% to 6.63% this week, and there remains no doubt as to why the mortgage market overall is suffering here in the U.S. Similar problems affect world mortgage markets, but the U.S. data shows just how acute the problem is here.

With real estate sales prices in 20 cities plummeting 15.3% in April from a year ago, it's easy to see that there just isn't enough demand to satisfy the enormous supply of real estate.

Of course, mortgages will still be written, but they won't be written in nearly the same numbers that were experienced over the past 10 years. Lenders are being much more careful and stringent in their examination of home loan applicants. This is all to the good in the long run for the industry, but it's the short run that has so many concerned. Already large numbers of small lenders have been wiped out and have disappeared from the map. Until the supply imbalance to demand straightens itself out, we'll undoubtedly see more of the same.