Forex Training Blog

Major Canadian bank is warning that U.S. housing prices are in for a double-dip decline.  Related equities that have already priced in a recovery in that sector will suffer as a result.  Sectors from forestry to banking could be caught up in the downturn, according to that bank.

The bank reasons that any semblance of stabilization in the U.S. housing sector Is just really a reflection of a badly damaged market being unduly influenced by temporary tax incentives.  Accordingly, a sustainable rebound is not likely.

The bank anticipates further weakness, noting that supply will continue to outpace demand, mortgage rates will head higher, and the government’s homebuyers’ tax credit will finally expire.

The bank sees a further decline in prices of five to 10 percent over the next two years.

There are close to two million mortgages that are more than 90 days delinquent.  Another 2.3 million properties are in foreclosure,  Add that to the mix, and you have an inventory of more than eight million units on the market - a record high, representing 16 months of supply.  And, as if that is not enough bad news, 10 million households are now in a ‘negative home equity’ position of worse than 20 percent.

Translation: many homes are now worth at least one-fifth less than their owners paid for them during the sub-prime housing bubble.  ‘Strategic defaults’ may be the only option for some people, wherein they simply walk away from their mortgages.  All of these factors make a recovery in the housing market seem implausible, especially given the fact that there are 24 million Americans now out of work.

Peter Bain
www.forexmentor.com

This entry was posted on Thursday, February 4th, 2010 at 4:41 pm and is filed under Blogroll. You can follow any responses to this entry through the RSS 2.0 feed. Responses are currently closed, but you can trackback from your own site.