Investing in Housing: Delinquencies Doomsday?
By
It was March 13, 2007 when the Dow plunged on Mortgage Bankers Association (MBA) news that Q4 2006 delinquency rates leapt to 4.95% from 4.67%, which leaves us to ponder if today’s MBA news will have a similar impact given a weak legged housing market.
Could we now be in store for a similar sell-off as the MBA prepares to release Q1 2007 data? Unfortunately, any negative MBA read will only re-strengthen lingering fears that mortgage delinquencies will eventually force consumers to cut back on discretionary spending as lenders tighten credit in the housing slowdown. Plus, consider that over the next five years, $1 trillion in ARMs will reset with $100 billion resetting between now and October 2007. Worse, after seeing a 90% jump in year-over-year May home foreclosures, as a result of delinquencies, we’re less than enthused about this morning’s report.
As for this “mythical” housing bottom that foolish bulls tout, ignore it. Better yet, if some one attempts to give you a reason for a housing bottom, laugh in their face. There is no near-term bottom scenario unfolding for housing.
Take care,
Ian L. Cooper
Death Cross Trader